It’s 2022 and legal cannabis is set to appear on a variety of state ballots once again, inching its way closer and closer to a national marketplace.
From proposed adult-use programs to cannabis-friendly politicians aiming to enact change, there’s plenty to pay attention to – and even more so if you’re thinking about launching a cannabis business of your own.
How much is the cannabis industry worth?
The cannabis industry’s value increases significantly every year as more states continue to legalize the plant in some form. As a result, experts predict that the U.S. legal cannabis industry’s sales will hit $30 billion this year – a $10 billion increase from 2020 – and $47.6 billion by 2026.
This growth continues to make the legal marijuana market attractive, especially considering that the cannabis industry still isn’t fully legal throughout the U.S.
With another handful of states including cannabis on their midterm ballots this year, the industry is only expected to get more competitive, so starting your business plans sooner rather than later is a good idea.
Cannabis on the midterm ballots
Changing federal laws is still the industry’s ultimate goal. Senator Chuck Schumer plans to file the Cannabis Administration and Opportunity Act (CAOA) in April, and the SAFE Banking Act, which will provide cannabis operators with solutions to the ongoing intra-industry banking issues.
In the meantime, the industry’s eyes remain on individual state ballots, and it looks like 2022 might just be another banner year for cannabis legalization.
A few different campaigns are currently pushing for legal adult use cannabis in Arkansas, where only medical marijuana is available today.
While efforts for legal adult use cannabis in Delaware were squashed in 2021, this year seems more promising for the state.
Representative Edward Osienski recently filed a new version of the House Bill 305 that aims to regulate and tax marijuana in the same manner as alcohol.
Hawaii attempted to legalize adult-use cannabis again in 2021. The bill stalled after it failed to move past a crucial House committee deadline. While Governor David Ige did allow decriminalization in 2020, he has stated his concerns about legalizing cannabis for adult use. Without federal rescheduling, residents of Hawaii may have a long time to wait for cannabis legalization in the 50th state.
Idaho is one of the few remaining states with no form of legal cannabis, but it looks like medical cannabis may be on the state’s 2022 ballot. Multiple campaigns are working to collect signatures for the initiative that could help change Idaho state law.
Lawmakers in Kansas introduced a Medical Marijuana Regulation act in March that would provide access to limited forms of medical marijuana to patients with one of 20 qualifying medical conditions. Compared to similar legislative efforts that have failed in the state, this bill expands upon qualifying conditions. Other proposals are expected to be introduced this year that would ask voters to determine the future of adult-use and medical marijuana in their state.
A cannabis bill to legalize and tax marijuana is top priority for some lawmakers in Kentucky, with support from Representative Jason Nemes, Governor Andy Beshear, and several others in the state. However, bipartisan support is still considered a longshot in the Bluegrass State.
House Speaker Adrienne Jones is working hard to get the state’s adult use legislature in order for the 2022 ballot.
Minnesota’s adult use bill stalled in the Senate in 2021. The chance for passage is still alive and well in 2022, but it isn’t quite clear yet which way the Senate will sway. Governor Tim Walz has called on lawmakers to get to work on passing legislation, noting that his budget would set aside $25 million for the creation of a new “Cannabis Management Office.”
Mississippians are holding their breaths this year as lawmakers move ahead with a proposed medical program for the state. Governor Tate Reeves has a few objections with the language, but other lawmakers are working to ensure they can come to an agreement and finally pass the bill.
Nebraskans are making yet another effort to push through medical cannabis legalization on the ballot with the Nebraska Medical Marijuana Initiative (2022), and are confident this will be the state’s year.
New Hampshire’s House of Representatives began 2022 with an approved bill for the possession and cultivation of cannabis. Now, it will have to pass the Senate to move forward.
North Carolina has been incredibly hesitant to go anywhere near cannabis, but advocates in the state are hopeful that a proposed medical cannabis bill will pass this year for those with debilitating medical conditions.
North Dakota’s House of Representatives passed two related bills last year, but the move to tax and regulate cannabis was rejected by the Senate. Advocacy groups are working to acquire signatures to get the bill on 2022’s ballot.
A legalization bill proposed last year would legalize the possession, sale, and cultivation of the plant by Ohioan adults.
Oklahoma is hoping to get two things accomplished on their ballot this year, aiming to legalize adult use cannabis with the Oklahoma Marijuana Legalization Initiative (2022) and reworking the state’s existing medical program.
Rhode Island’s cannabis legalization bill was approved by the Senate last year, and is very likely to pass in 2022 after a lengthy negotiation.
Senator Tom Davis is championing a medical cannabis bill for the state, which would allow medical patients to possess and purchase up to two ounces every two weeks.
South Dakota’s Supreme Court shot down 2020’s legalization efforts, but activists are optimistic about 2022.
How to start a new cannabis business
Starting a cannabis business in 2022 is exciting and ripe with opportunities for cannabis entrepreneurs. Whether you’re looking to transfer your skills from a traditional business setting – like finance, law, investing, or marketing – or aiming to open a plant-touching business such as a commercial grow, there’s still plenty of room for you to leave your mark in the cannabis space.
First, you need to determine if you and your team are best suited for a business that deals directly with cannabis or if your skills and goals are a better fit for something ancillary.
The 3 best ancillary cannabis business opportunities
When it comes to figuring out which type of cannabusiness you want to invest in, it all depends on your comfort level with risk, uncertainty, and starting capital.
While something like a brand new brick-and-mortar dispensary in a developed market such as California is a highly competitive (and expensive) field to enter into, you’re going to need a significant investment to participate. However, there are plenty of other options with far fewer barriers to entry.
- Professional Services
Many products or services will fall under this umbrella, like marketing, investing, or finance. These are all of the support departments that are necessary for the success of any small business in any industry, and cannabis is no exception. The industry is always in need of talented lawyers, compliance specialists, web developers, and many more roles.
If you’re interested in a hands-on cannabusiness that keeps you and your team away from the plant, you can focus on the aspects of industry production that don’t involve actual weed, like packaging, equipment, technology, or facility construction.
Any cannabis business will need a sturdy security team capable of adhering to stringent requirements, which may come as no surprise considering how much of the industry is still forced to deal with significant amounts of cash on a daily basis. Providing security for these businesses allows you to get involved at the retail level without actually touching the plant.
The 3 best plant-touching business opportunities
If you’re interested in starting up a business that deals directly with the cannabis plant or any of its active ingredients, be prepared to deal with a higher level of risk, ever-changing regulations, and limited tax breaks due to the fact that cannabis remains illegal on a federal level.
However, working closer to the plant allows you to have more of an influence over how the industry operates, and some new businesses may find unique social equity opportunities in the form of licensing meant to empower people and communities that have been harmed by the nation’s war on drugs.
The most obvious plant-touching business for entrepreneurs is the brick and mortar dispensary: the center of cannabis retail and consumerism for adult use customers and medical patients alike. In states with developed markets like Colorado and California, the most feasible option is likely going to be purchasing the business from an existing owner. However, entrepreneurs in new and emerging markets will want to identify a suitable location and explore the licensing and application process. Startup capital can easily reach more than $1M in some markets for licensing fees, rent, advertising, retail staff, and security.
If you’re interested in getting involved with the process of cultivating the product itself, the industry is always in need of new grow facilities, especially as it continues to legalize and expand throughout the U.S. and beyond. Whether that’s purchasing or leasing land for a commercial grow operation or finding a master cultivator to work with you in building a new brand, there’s no shortage of lucrative opportunities in growing cannabis commercially. Just like with dispensaries, the real estate you intend to use for your grow is an integral part of the application process. Potential owners will want to consult with knowledgeable legal and accounting professionals to determine whether owning or leasing is the best option for each situation. Startup capital varies widely depending on the size of the operation and state.
Manufacturing cannabis products is a crucial step of the supply chain. With cannabis still federally illegal, each legal state is responsible for producing their own cannabis products, so there’s definitely an ever-increasing need for this piece of the weed puzzle. Everything from planting seeds to post-harvest processes like trimming, sorting, extracting, and packaging on a commercial scale involve highly-customized, industry-specific solutions that sell for tens of thousands of dollars a piece. Inventive entrepreneurs with consumer packaged goods and engineering experience may find their talents and experience in high demand.
Challenges for cannabis startups to overcome in 2022
It’s no secret that cannabis stigmatization is no longer a pressing issue in the industry like it was a decade ago – fewer than 10% of U.S. adults say marijuana should not be legal at all – but as long as the plant remains classified as a Schedule I drug, cannabusinesses will continue to deal with hiccups in development. For most cannabis businesses, the financial limitations that are a direct result of the stigmatization of the plant still create difficult challenges to overcome on a daily basis.
Banking and taxes
As we mentioned earlier, banking is a major issue for the industry, as most U.S. financial institutions won’t do business with an industry that isn’t federally legal. Unlike in other industries, building the right team and the perfect business plan won’t lead to traditional financing. There are an increasing number of options for operators to utilize, especially if the SAFE Banking Act finally passes, but in the meantime, it remains a massive hurdle. While secure funding can be difficult, the lack of standard business deductions and expenses as a result of section 280E of the federal tax code creates an ongoing challenge for profitability. Plant-touching businesses will want to be especially cautious and understand the financial implications of this issue.
Advertising and marketing restrictions will vary from state to state, but every region with a legal form of cannabis has some form of limitation for advertisers. This makes it tough for cannabis business owners to promote themselves, as they’re forced to get really creative with their approach. For marketing experts, this presents a unique opportunity to think outside of the box and run promotions and social media in unique ways. New cannabis businesses should consult with an experienced legal team in their state to ensure their advertising plans are in line with state and local regulations.
Perhaps the most obvious challenge the industry continues to face is the ever-changing regulations surrounding cannabis. The nation seems to be inching toward a more cohesive future in regard to cannabis legislation, but the concept of uniform law still feels pretty far off for operators. While many existing operators are feeling pressure to get their operations ready for federal legalization, most are still taking a wait-and-see approach in terms of forecasting and planning for the coming years. Companies need to position themselves to pivot quickly and take long-term plans and goals with a grain of salt as new opportunities arise and old ones close.