When America Goes to Pot

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When America Goes to Pot

Last November, four states—California, Maine, Massachusetts, and Nevada—legalized recreational use of marijuana, joining Alaska, Colorado, Oregon, and Washington, which did so earlier in the decade. 

Today, 20 percent of the U.S. population lives in a state where it is legal for people aged 21 and over to buy marijuana for recreational use.  Twenty-eight states have already approved laws permitting marijuana for medical use.

And it’s paying off for government and certain business interests:  Colorado, which legalized cannabis sales in 2012, surpassed $1 billion in legal sales and collected $150 million in sales taxes in the first ten months of 2016.1

The opportunity is attracting the attention of venture capital firms, which invested $1 billion in the industry in 2016.  Meanwhile, the cannabis stock index developed by analysts at Wall Street’s Viridian Capital Advisors went up 175.3 percent during the year.

A report from Arcview Market Research predicts that when data for the full year are released, legal U.S. sales of marijuana will exceed $7 billion in 2016.  With sales growing 31 percent each year, by the end of this decade, Arcview expects legal sales to jump to $22 billion.

But legal sales represent only a fraction of the total market for marijuana.  When illegal sales are included, the total market is currently $30 billion a year, according to a study by the Cowen Group, a financial services and research firm.  According to USA Today, that’s equivalent to the size of the coffee industry.2  Cowen expects legal sales to increase to $50 billion by 2026. 

The legalization of marijuana offers both benefits and drawbacks, as illuminated by several new research studies.

One effect of the legalization of marijuana is that teenagers appear to be buying less of it compared to ten years ago, despite concerns that legal sales to adults would increase teens’ access to it.

As Inc. reports, an annual survey funded by the National Institute on Drug Abuse called “Monitoring the Future” found that for each age group studied, specifically students in eighth, tenth, and twelfth grades, a smaller percentage now say it would be “fairly easy or very easy” to get marijuana if they wanted it.3

For example, in 1996, California legalized medical marijuana, and in that year 54...

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