Market research reveals the legal marijuana industry has grown, and could grow further in the coming years.
For success in online stock trading you need to be identifying future opportunities, sometimes those that many would not think of. Here is one such opportunity which could grow significantly in the coming years though there could be challenges.
The legal marijuana market is set to witness massive growth. In fact, it is set to triple in the coming 5 years. This is one area investors and traders need to be looking at.
Arcview’s Positive and Optimistic Picture
A report by Arcview Market Research reveals that in 2016, revenue from the legal marijuana industry touched $6.9 billion, which does not sound spectacular unless you consider the rate of growth of around 30% that brought the industry’s revenue to this level from just a year before in 2015. And Arcview says that the growth won’t stop there. The market is expected to grow at a 26% compound annual rate and reach $21.6 billion by 2021. That means there is significant potential out there.
The major factor contributing to this is the increasing legalization. In 2016 there were nine states that relaxed marijuana laws and legalized recreational use. Among these were Maine, California, Massachusetts and Nevada. Arcview believes this trend will continue, though one can’t be fully sure if such optimism is justified.
The Legal Situation
It’s true that in 2013, James Cole, the Deputy Attorney, indicated to federal prosecutors about adopting a more lenient attitude to states having legal markets while acknowledging the authority of the Department of Justice (DOJ) to enforce federal law. This leniency by the DOJ could be responsible for much of the success of the marijuana industry. The Trump administration could be harsher on weed though. Even now, marijuana is illegal federally with only a few states legalizing it. Couple that with a stricter Trump administration, and you could find the challenges for the marijuana industry increasing.
Challenges the Trump Administration Could Bring About
Trump’s attorney general nominee, Senator Jeff Sessions has been known to be against marijuana. In his recent Senate confirmation hearings though, a clear stand could not emerge from his responses to questions regarding marijuana policies in states legalizing it.
The Treasury could also make things tough for the industry. While in 2014, it allowed banks to work with marijuana dispensaries, only 51 of the banks and the credit unions accepted the deposits from the marijuana businesses. In 2016 there were 301 banks that did business with them, which still is a pretty low number. The IRS has also refused to allow marijuana businesses from deducting expenses, leading to dispensaries having to pay effective tax rate amounting to around 70%.
Reason for Optimism
But Arcview believes there is a solid case of optimism since the trend towards acceptance is increasing. According to Gallup, there is around 60% support for marijuana legalization which is over double the rate it was 16 years ago in 2000. And there is the Rohrabacher-Farr amendment of 2014 that prevents the DOJ from spending money for interfering with the efforts of states at legalizing marijuana. And in November 2016, an REIT renting space to marijuana growers licensed by the state – Innovative Industrial Properties Inc. ($IIPR) – listed on the NYSE.
These events and the ongoing efforts to legalize have led Arcview to paint an optimistic picture for the marijuana industry. If things remain positive, which needs to be seen as Trump and his team settle more comfortably in their new roles, the revenue growth is sure to be phenomenal since demand is already there.