Following the 2020 elections, 15 of 50 U.S. states had voted to legalize cannabis for adult use. Though impressive progress has been made since Colorado and Washington
legalized adult-use cannabis in 2012, the northeast has been slow on the draw, except for Maine, Vermont and Massachusetts.
Yet, on November 3, New Jersey voted to legalize for adult use by more than 30 percent, setting off an assured chain-reaction of legalization across the region. New York, Pennsylvania, and Connecticut are sure to follow. Here, I’ll explain why the northeast will soon become a cannabis hub and what neighboring states can learn from New Jersey when looking to legalize.
A Necessary Stream of Revenue
Although New Jersey Gov. Phil Murphy had long sought to establish an adult-use cannabis market, local lawmakers from both parties weren’t convinced. When the COVID-19 pandemic took hold of the country, these lawmakers changed their calculus.
In addition to its tragic consequences on human health, COVID-19 has decimated state budgets. New Jersey and the surrounding region were not immune. Gov. Murphy announced that New Jersey faced a budgetary shortfall of $5.7 billion over projections. The state urgently needed to find new revenue streams, and cannabis was an obvious choice. While tax revenues from adult-use cannot fill the budgetary hole alone, they can make a big dent. For example, in its first year of existence, the adult-use cannabis market in Illinois has generated over $150 million in tax revenue.
Other states will surely note this impressive number. New York projects a $59 billion budget hole through 2022 as a result of the coronavirus pandemic. Pennsylvania faces a reported $5 billion deficit over the next two years. And Connecticut Comptroller Kevin P. Lembo announced an expected $2.1 billion budget shortfall this September. With deficits like this, every dollar makes a difference. So, the question becomes not whether these states will legalize adult-use cannabis but when and how.
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Establishing a Market
Each state will legalize cannabis through its own process. In New Jersey, the first step was for residents to vote to legalize on election day. Lawmakers then passed a set of bills in rapid time to create a framework. In New York, adult-use cannabis will likely be legalized through the state budget, a trickier process. Nonetheless, states looking toward cannabis legalization can take important cues from the urgency with which New Jersey lawmakers acted on the policy, and what was included in the state’s legislation.
Three days after New Jersey passed its ballot measure to legalize adult-use cannabis on November 6, Gov. Murphy selected and announced the members of the Cannabis Regulatory Commission, which will regulate the nascent adult-use cannabis industry. Just over a month later on December 17, the state legislature passed one bill to allow residents to possess up to six ounces of cannabis, and another to set rules for taxation and licensing. By getting regulators in place to help define the legislative conversation, state governments can lighten the burden of advancing legalization through their own state legislative chambers.
Another important lesson that states can learn from New Jersey is to be restrained in the progressive policies included in legalization legislation. At one point, the New Jersey state Senate amended the cannabis decriminalization bill to include a policy that would have decriminalized psychedelic mushrooms. This caught lawmakers off-guard and threatened to derail the process entirely. State Senator Nia H. Gill told The New York Times
, “It creates a narrative of the public not having faith in the integrity of the process.” If other states want to avoid these headaches and achieve fast results, they would be well served to limit their focus to cannabis and save other issues for another day.
The Straw that Broke the Camel’s Back
Years from now, New Jersey’s vote to legalize cannabis will be seen as the domino that fell in the northeast. New York, Pennsylvania and Connecticut have long debated the merits of legal cannabis. Considering the financial pressure created by COVID-19 and the fact that New Jersey is now a pioneering example for the region, those states’ debates become much simpler.
The northeast is one of the most densely populated regions in the country, representing a tremendous opportunity for the cannabis industry. New Jersey’s population is 8.8 million, and it is projected to create an estimated $1 billion market for adult-use cannabis by 2024. When added to the 35.8 million residents of New York, Pennsylvania and Connecticut, the estimated revenue numbers become staggering. The cannabis industry sees exponential growth in the northeast, and New Jersey will be viewed as having seeded the industry in the region.