Here’s How Big the Marijuana Market Could Be in Colorado in 2018

Fox Business/January 27, 2018/Motley Fool

Colorado’s a state that every marijuana investor should be watching because its maturing recreational market offers insight into what may happen in other states Opens a New Window.  that legalize cannabis. So far, Colorado’s recreational marijuana market has been a success. Since recreational marijuana became available in 2014, marijuana sales have grown from $996 million in 2015 to $1.25 billion in 2016 to $1.49 billion in 2017. Can demand push Colorado’s marijuana sales even higher in 2018?

Momentum to end marijuana prohibition has picked up significant momentum over the past 20 years and that momentum has increased as more states have passed laws creating recreational marijuana markets. So far, 30 states have medical marijuana laws on the books and eight of those states have OK’d recreational marijuana, too.

It’s likely that more states will follow suit, especially given shifting attitudes among Americans. Since Gallup began asking Americans about their opinions on marijuana in 1969, there’s never been a time when more Americans have favored legalizing it.

The research company’s 2017 survey shows that 64% of the country believes that marijuana use should be legal, including 72% of Democrats and 51% of Republicans. Democrats have supported legalizing marijuana since 2010, but it’s only recently that Republican support has picked up. Only 28% of Republicans were OK with legal weed in 2010 and only 35% were in favor of legalization as recently as three years ago.

Improving support among conservatives to legalize marijuana may suggest that worries over stricter enforcement of federal laws prohibiting marijuana by the Trump administration may be overblown. If so, it wouldn’t be surprising if more red states start paying attention to what’s going on in Colorado, the first state to legalize and tax recreational use.

Colorado’s recreational marijuana market has been a big success by many measures. In terms of sales and tax revenue, it’s been a particularly good experience.

The state’s marijuana sales have increased from $699 million in 2014 to nearly 1.5 billion last year, and according to GreenWave Advisors, sales could hit $1.64 billion in 2018. State tax revenue from marijuana taxes, licenses, and fees added $247.4 million to Colorado’s budget in 2017, up from $193.6 million in 2016, and $135 million in 2015.

Undeniably, legalization has shifted a significant share of marijuana sales from the black market to dispensaries. However, GreenWave’s 2018 forecast does suggest marijuana investors and industry participants might want to start tempering their optimism. If Colorado’s market achieves GreenWave’s estimate this year, it would represent just 10% year-over-year growth, which isn’t nearly as impressive as we’ve witnessed so far. Sales grew 19% year over year last year alone.

Colorado’s decelerating growth rate may be explained by the fact that its market has matured and is now serving most residents who are interested in consuming marijuana. It could also be because marijuana wholesale prices are falling. The state’s marijuana producers have rushed to add capacity to meet demand and that may have resulted in too much marijuana production. In November, The Economist reported that marijuana prices per pound have declined from $2,000 in early 2015 to about $1,300. That trend has continued this winter. According to Cannabis Benchmarks, Colorado spot prices per pound fell $210 last week to $1,131.

Colorado’s slowing growth and falling wholesale prices may lead to consolidation as smaller operators with higher operating costs sell-out or close shop. If that happens, then investors will need to become more selective when it comes to picking which marijuana stocks to buy or businesses to invest in.

A thinning of the herd in Colorado could ultimately be good news for the strongest players. However, there’s still plenty of obstacles that make investing in U.S. marijuana companies risky. For example, marijuana’s still illegal at the federal level, so marijuana businesses have limited access to banking services, they can’t build scale by operating across state lines, and they’re forced to pay inflated tax bills because they can’t deduct many common business expenses.

Colorado Could Become a Marijuana Sanctuary State

MG News/April 27, 2017/Danny Reed

State officials voted on a measure that could prevent law enforcement from assisting federal agents targeting marijuana.

It is unclear if the anti-marijuana statements coming from the White House and Attorney General Jeff Sessions is simply rhetoric or foreshadowing. Colorado lawmakers may not want to wait to find out.

The state house approved a measure prohibiting police from working with federal authorities in “arresting a Colorado citizen for committing an act that is a Colorado constitutional right.” The proposal was passed by a 56-7 margin.

While the bill does not mention marijuana directly, the sponsors of the measure have been motivated by the tough tone the Trump White House has taken toward legalized marijuana. Jeff Sessions has been hinting at a potential crackdown since being confirmed.

This is not the first state to consider such action. Earlier in the month, we reported on a similar plan in California to prevent state authorities from coordinating with the federal government to target marijuana businesses and patients.

Federal raids typically rely on assistance from local law enforcement. While these laws may not totally prevent federal interference, it likely federal authorities would not have the resources to pursue a nationwide crackdown on marijuana on their own.

Colorado is also considering another measure that would allow growers to classify all marijuana as medical. This could spare plants from being confiscated under possible federal plans to target the recreational market.