In this week’s cannabis news round-up, Ohio becomes the 24th state to legalize adult use cannabis; hemp-derived cannabinoid sales outpace legal cannabis; and cannabis businesses challenge federal prohibition in landmark lawsuit.
Ohio Becomes Latest State to Legalize Adult Use Cannabis
Buckeye State voters have approved a measure legalizing adult use cannabis, making Ohio the 24th state to adopt such a policy. This decision marks a departure from the stance of Republican legislative leaders, who had previously opposed the legalization of cannabis for non-medical purposes.
The passing of Issue 2 sends a clear message that Ohioans are ready to embrace a more regulated approach to cannabis use. Supporters of legalization argue that it will lead to increased tax revenue, job creation and a more effective way to manage the substance.
“Today marks another historic moment for the cannabis industry and for Ohio, as voters have chosen to end Prohibition 2.0 in the Buckeye State, says Ben Kovler, CEO of Green Thumb Industries. “This vote isn’t just about legalization; it’s a recognition that Americans are continuing to embrace cannabis for wellness.”
Under the new law, adults 21 and older will be permitted to purchase and possess up to 2.5 ounces of cannabis and cultivate plants for personal use. A 10% tax will be imposed on cannabis sales, with the proceeds allocated towards administrative costs, addiction treatment, municipalities with dispensaries and social equity and jobs programs within the industry.
While some, including Republican Governor Mike DeWine and business organizations, have expressed concerns about the potential impact of legalized cannabis on workplace and traffic safety, the public’s overwhelming support for Issue 2 suggests that these concerns may be outweighed by the perceived benefits.
“With this legalized industry poised to generate $3-4 billion in sales at maturity within the next 3-5 years, cannabis will provide an estimated $350 million in annual tax income for the state, representing a significant financial boon that can support public services and contribute to the overall economic vitality of Ohio,” says Colin Ferrian, Portfolio Manager at Poseidon Investment Management.
Report: Hemp-Derived Cannabinoid Sales Outpace Legal Cannabis
Despite lacking comprehensive federal regulations, the US hemp industry thrived in 2022, surpassing the combined sales of all state cannabis markets and equalling those of the craft beer industry nationwide, according to a recent report.
Research firm Whitney Economics released the report last week, providing a thorough analysis of the hemp industry’s evolution since its federal legalization under the 2018 Farm Bill. While regulatory hurdles, particularly regarding cannabinoid products like CBD, have caused frustration within the hemp market, the report reveals that the industry generated an impressive $28.4 billion in sales of these products last year.
“For perspective, hemp-derived cannabinoid sales in the US exceeded total legal sales of medical and adult-use cannabis in 2022,” the report states. This may be surprising given the legalization of cannabis in various forms across most states.
Significantly, the hemp-based cannabinoid market rivals the well-established craft beer industry. The American Beer Association reports that craft beer sales reached $28.4 billion in 2022, matching the amount generated by hemp-derived cannabis products.
“Currently, the overall demand for hemp-derived cannabinoids is estimated at over $28 billion and supports the employment of 328,000 workers, who earn $13 billion in wages,” Whitney Economics states. “Overall, the total economic impact of the hemp-derived cannabinoid industry on the US economy exceeds $79 billion. While these figures may seem large, they are actually conservative, as they do not account for demand and employment from gas stations, grocery stores and convenience stores.”
Based solely on sales tax collected from hemp products, the firm estimated that states collectively generated $1.5 billion in tax revenue from the crop in 2022.
The report highlights several factors driving the hemp industry’s robust growth, including rising consumer demand for hemp-derived cannabinoids, federal hemp legalization and the development of innovative hemp-based products.
The report concludes that the hemp industry is poised for continued growth in the coming years.
Cannabis Businesses Challenge Federal Prohibition in Landmark Lawsuit
A coalition of cannabis businesses has filed a landmark lawsuit against the US government, seeking to overturn the federal prohibition on intrastate cannabis production and distribution. The lawsuit challenges the constitutionality of the Controlled Substances Act (CSA), arguing that it has no basis for enforcing the ban against state-legal cannabis businesses.
The plaintiffs, represented by prominent law firms Boies Schiller Flexner LLP and Lesser, Newman, Aleo & Nasser LLP, assert that the federal government has abandoned its original intent to “eradicate” cannabis and that the regulated cannabis products in states with legalization are clearly distinct from illicit interstate cannabis.
The lawsuit argues that the federal government’s continued enforcement of the CSA against state-legal cannabis businesses is an unconstitutional overreach of its authority, causing significant harm to businesses and individuals in the industry. The plaintiffs are seeking a declaration that the CSA is unconstitutional as applied to intrastate cannabis operations and an injunction barring the federal government from enforcing the law against state-legal cannabis businesses.
The lawsuit has the potential to significantly impact the future of the cannabis industry in the US. If successful, it could pave the way for greater federal recognition of state-legal cannabis programs and provide much-needed relief to businesses and individuals in the industry.