Pennsylvania Governor Urges State to Legalize Marijuana: This Week in Cannabis Investing

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The time is now! Days after unveiling a budget proposal calling for the legalization of adult-use cannabis, Pennsylvania Governor Josh Shapiro says state officials "don't even have a choice anymore" on the matter.

The push for adult-use cannabis legalization has received bipartisan support and Shapiro argues the state is losing out on $250 million in annual revenue by not legalizing the plant for adult use. The governor has personally "evolved" his thinking about the matter and believes the Keystone State can create a competitive market that lifts up Pennsylvania businesses and empowers local communities. If he is able to achieve his goal, adult-use sales in Pennsylvania could start as early as January.

"It’s obviously wildly popular across the country and certainly in polling regionally and in the states. So if someone's going to be against it, I think they're going to have to justify that to their constituents as well," Shapiro said.

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"There does seem to be an emerging bipartisan consensus that we've got to compete on this issue, and we'll see if we can get it done. We’re going to work hard."

It is encouraging to hear the governor express his "reformed" opinions and motivate legislators to take action. His views are well-balanced and aligned with the reality of today's industry. Reading about Shapiro's recent efforts is one of the most encouraging stories in quite some time. While much attention is paid to progress made at the federal level, state-level progress is the key to unlocking billions in legal sales across the country.

With public officials like Shapiro leading the legislative charge, Pennsylvania and several other states can continue the process of breaking down the wall of prohibition and building a brighter future that provides patients and adult-use customers with the medicine, health and wellness products they need while generating millions, if not billions, of dollars in revenue for state and community efforts.

Florida legislatures aim to place cap on THC

Florida is home to the largest medical cannabis market in the nation and Governor Ron DeSantis expects adult-use legalization to appear on the ballot in November. While this all sounds promising, there is a catch or, rather, an attempt to thwart the viability of an adult-use program.

With the support of the Senate Health Policy Committee, state lawmakers have introduced Senate Bill 7050. If the bill were to pass and be signed into law, it would place a 30% THC cap on smokable flower and implement a 60% THC on all other forms of cannabis, excluding edibles. Senate Bill 7050 would limit the amount of THC in edible product offerings to 10 milligrams per serving and 200 milligrams per package.

The restrictions placed on edibles are in line with those enacted in other states, but Florida would join Connecticut and Vermont as the only two states to place a 30% THC cap on smokable flower. Some lawmakers argue highly potent products present health risks to Floridians, but others feel voters should make such a decision.

"If voters are going to speak the ballot initiative one way or the other … I want to give that process an opportunity," Senator Rosalind Osgood said.

This is not the first time that legalization has made its way to the ballot in Florida and it is not the first time that legislators have stood in the way of a viable adult-use program. Adult-use legalization detractors may stand in the way of progress, but the will of the people will not be denied. There is much to be gained if Florida launches an adult-use program, including increased revenues, opportunities for entrepreneurs to enter the marketplace and much more.

There is still great optimism that the Supreme Court will rule to include adult use on the ballot in November and the good people of Florida will have the opportunity to exert their will on the political process.

Massachusetts sales hit record high again

Massachusetts is one of several states to end 2023 on an upswing. The Bay State's adult-use cannabis businesses generated $1.56 billion in sales last year, a $78 million increase from the previous year. Adding in medical transactions, the state's sales total grew to $1.79 billion in 2023. It is the state's sixth consecutive year of record-setting growth in adult-use cannabis sales.

During that six-year stretch, the number of retailers and delivery businesses in Massachusetts has grown from two in 2018 to 359 in 2023. As a result, nine of the state's top 12 months for adult-use sales have occurred in the last year.

"This continued growth confirms that Massachusetts' regulated marijuana industry is still a maturing market," Cannabis Control Commission Chairperson Ava Concepcion said.

As sales rose in Massachusetts, prices also decreased in 2023. The Bay State has and can continue to manage the price normalization cycle by creating retail openings in new jurisdictions. Price can also be offset by unit volume growth through existing doors, but that is a higher bar.

Utilizing these strategies, Massachusetts will continue to generate record-high sales that are essential indicators for public operators exposed to these evolving markets. This will become more visible as public companies begin rolling out their fourth-quarter earnings reports.

Rep. Bluemauer calls for transparency from DEA

The cannabis industry will forever remember the action or inaction of the U.S. Drug Enforcement Agency (DEA) in 2024. Months have passed since the U.S. Department of Health and Human Services (HHS) recommended the reclassification of cannabis under the Controlled Substance Act (CSA). Still, the federal agency has taken no concrete action. Now, the cannabis industry and members of Congress are left to wonder when the DEA will reclassify the substance.

This past week, Congressional Cannabis Caucus Co-Chairman Earl Bluemauer grew increasingly put off by the DEA's review process and sent a letter requesting answers to the following questions:

What is the DEA’s planned deadline to publish its draft rule on the scheduling of marijuana for public comment?
What is the standard timeline for the DEA’s drug scheduling reviews?
On what date did the DEA begin reviewing the findings of the HHS and recommendation on cannabis re-scheduling?
How is the DEA ensuring the agency’s review incorporates the status of cannabis under state laws and regulations in its scheduling decision?
How will the DEA proactively communicate developments and receive feedback from congressional partners as the review proceeds?

Earl Bluemauer is not the only member of Congress to issue a letter to DEA Administrator Anne Milgram. Earlier this year, Senators Chuck Schumer, Elizabeth Warren and John Fetterman urged the DEA to remove cannabis from the CSA altogether. Unfortunately, the DEA is not required to respond to any of the letters in a timely fashion or at all.

Congress can create the change it seeks, but they have elected to choose words before action. A letter is excellent for grabbing headlines and putting forth one's thoughts on the paper, but this hardened cannabis investor does not get one bit excited seeing this request from Congress.

Morgan Paxhia is Managing Director and Co-Founder of Poseidon Investment Management. With over 10 years experience in investing and finance, Morgan has developed a deep understanding of individual company analysis, portfolio construction, and risk mitigation. This content is not intended to provide any investment, financial, legal, regulatory, accounting, tax or similar advice, and nothing should be construed as a recommendation by Poseidon Investment Management, LLC, its affiliates, or any third party, to acquire or dispose of any investment or security, or to engage in any investment strategy or transaction. An investment in any strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. This content should not be considered as an offer or solicitation to purchase or sell securities or other services. Any of the securities identified and described herein are for illustrative purposes only.  Their selection was based upon nonperformance-based objective criteria. The content presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Past performance is not indicative of future results.