As we step into 2023, it’s time to pause and contemplate the achievements and setbacks the cannabis industry has seen over the past 365 days.
The cannabis industry continues to thrive in new recreational states, while legislators and voters have been very busy expanding the cannabis movement across the country.
Several new cannabis recreational markets began their operations in 2022, and states that had been caught up in protracted regulation writing saw progress. Additionally, promising and unexpected development was observed in states that weren’t even on the radar the previous year. Hopefully, 2023 will be a big year for the cannabis industry with many states passing the adult-use bill, cannabis tech taking the big innovative leap, and coming to an apt solution for cannabis payment.
In the United States, the cannabis sector has made major progress in 2022. Here are the year’s defining moments.
Good Things That Happened in 2022
New Markets
New York Rec Market
On Dec. 29, the first 21-plus legal cannabis sales in New York began with a non-profit assisting justice-involved individuals.
The New York State Cannabis Control Board has so far approved the go-ahead for 36 new conditional adult-use retail dispensary licenses. The state expects to issue 139 more in 2023.
New Jersey Rec Market
Although recreational cannabis sales started on April 21, 2021—the day after the cannabis high holiday—Garden City had approved recreational marijuana sales to anyone over 21 in February last year. 42,811 transactions totaling $3.5 million were done within the first three days of legalization.
The New Jersey Cannabis Regulatory Commission has reported that the first adult-use dispensaries in the state made $24 million in their inaugural month of operation.
New Mexico Rec Market
Starting April 1, 2022, all adults above the age of 21 got the right to buy up to two ounces of cannabis at retail outlets across the state.
The changes went into effect a decade and a half after the state initially started providing medicinal marijuana to help people with health conditions including cancer, and a percentage of future supplies are now being set aside for cannabis patients.
Successful Ballot Measures & New Upcoming Markets
Mississippi Medical Cannabis
Mississippi is currently on schedule to start selling medical marijuana in January 2023. Though a little over 400 people are currently authorized to acquire medical marijuana, there are expected to be 138 outlets and 47 growers.
Missouri and Maryland Recreational Cannabis
In 2022, voters in Maryland and Missouri approved ballot measures that legalized recreational cannabis for adult use.
With more than 65% of voters in Maryland supporting its passage and 82% of ballots tallied made it an easy victory. On the other hand, 53% of the votes were in favor, while 89% of the total votes were counted in Missouri, where the results were closer.
Alabama Medical Cannabis
The rush to apply for a license to start medicinal marijuana dispensaries swept across Alabama’s cities. Some cities made a last-minute effort to submit theirs before the application deadline on December 30.
More than 600 businesses have paid the $2,500 application fee as of December 19 in order to sell cannabis when it becomes legal, according to the AMCC.
Illinois Licenses
On Monday, January 30, 2023, the Illinois Department of Financial and Professional Regulation (IDFPR) will start accepting applications for 55 new conditional cannabis dispensary licenses.
Submit your license application online through the IDFPR website. Anyone interested in applying should review the rules, the sample application, the proposed schedule, and other pertinent papers that are currently available on the department’s webpage for the recreational cannabis program.
New Florida Licenses
Florida is one of the most lucrative medical marijuana markets in the US, with more than 22 million residents and an aging population. The first half of 2022 saw more than $1 billion in medical marijuana sales in Florida, which currently has 22 licensed operators.
In a widely anticipated move that may double the size of Florida’s medicinal cannabis business, state health authorities began the process to issue up to 22 additional medical marijuana licenses after evaluating the opportunity and need.
The new renewal fee is calculated using a technique that takes into account the cost to the state of regulating the industry. For license renewals that must be done between January, 2023, and December, 2024, the fee will be approximately $1,330,000.
Other Good News
President Biden’s Pardons Focus On Easing Drug Punishments
President Biden annulled thousands of people’s sentences for federal offenses related to simple marijuana possession in October 2022. He also started a reassessment of how the drug is categorized by federal authorities. He also granted full pardons to six people in December 2022, the majority of them had been convicted of drug and alcohol-related offenses decades earlier while they were young.
Columbia Care M&A
On March 23, 2022, a merger and acquisition agreement between two of the largest vertically integrated cannabis enterprises in the world was announced.
In order to acquire New York-based Columbia Care for about $2 billion, Chicago-based Cresco Labs Inc. entered into a definitive arranged agreement. As part of this agreement, Cresco will buy all of Columbia Care’s issued and outstanding shares in a deal that closed in the fourth quarter of 2022.
The key highlights of the M&A are as follows:
- Market share leader in key states
- Become the largest multistate operator by Pro-forma revenue
- Strategic plan to establish a national footprint
- Gain exposure to the adult-use upside
Not-So Good Things That Happened in 2022
Cannabis Price Downturn
The country’s marijuana growers are feeling the pinch due to the declining wholesale prices for their products. This has pushed some of them out of business and forced others to diversify into opportunities for side businesses that offer a more stable source of income.
Good news for consumers whose wallets have been suffering, but potentially bad news for growers who, according to industry insiders, overestimated the market and are sitting on a surplus of unsold product.
Many say the demand for the adult-use market may have been overestimated leading to extra supply in the market.
South Dakota, Nebraska, & Kansas Reform Failures
Marijuana reform advanced through multiple state legislatures this year. These three states advanced legalization but ultimately failed to enact it in the year gone by.
- Legislators and advocates intended to get medical marijuana legalization on the ballot in Nebraska this year, but they were unable to get enough signatures.
- In November 2022, South Dakotans rejected a ballot measure to legalize marijuana. Additionally, a bill to implement the reform passed the Senate in February 2022 but failed to advance through the House.
- In 2022, the Kansas House of Representatives approved the legalization of medical marijuana; however, the Senate declined to do the same. The bicameral conference committee constituted by legislative leaders with the goal of arriving at a deal that could be approved by both chambers failed by the time lawmakers ended the two-year term in May.
Passage of Safe Banking Act Put Off (Again)
The Secure and Fair Enforcement Banking Act has been passed by the US House of Representatives six times, but the US Senate rejected it once again in June 2022.
With the SAFE Banking Act, banks, credit unions, and other financial institutions could have provided banking services to state-licensed commercial cannabis businesses without worrying about suffering penalties from federal authorities. Most banks won’t let cannabis companies open or maintain bank accounts since it remains a schedule 1 narcotic under the federal Controlled Substances Act, and it’s uncertain what legal risks are involved in allowing commercial cannabis businesses to the bank. Because of this, the majority of state-licensed commercial cannabis enterprises have had to either operate on a cash basis or establish accounts with credit unions that have exorbitant service costs.
State-compliant commercial cannabis enterprises will continue to experience operational challenges since they lack access to banking because Congress was unable to enact the SAFE Banking Act through both houses.
Cannabis Payment Platforms Issues
Cannabis payment platforms are being launched, however, they soon go up in smoke. The main reason for this is that the “cashless banking solution” has become the cashless banking problem.
Some of the biggest cashless ATM transaction processors in the country have stopped allowing processors to use their service. Since cannabis is still illegal under federal law, cashless ATMs were invented as a workaround. However, they were never compliant.
Because these fees are not just like an ATM withdrawal, the term “cashless ATM” is misleading. The name of the dispensary would disappear after a purchase was completed via a cashless ATM processor. By using a technique known as “masking,” you can keep banks from noticing a cannabis transaction in your account. Despite the fact that it seemed easier than paying with cash, this approach violated card networks’ policies and came with extra processing costs.
This has left cannabis retail operators in a scramble to try to find alternative solutions.
Looking Ahead At 2023
Moving forward, technological innovation will dominate the legal cannabis industry. Dispensaries will be able to optimize operations thanks to technology in a highly regulated industry where compliance is vital.
Since retailers will need to better understand their data to make more proactive, informed decisions, data will subsequently become more and more crucial. This will be a focus for dispensaries of all sizes but in particular, larger businesses that are seeking an increasingly high level of sophistication for their online experiences.
In addition, as retailers continue to undertake significant acquisitions and mergers, as we’ve already begun to see, there will be a growing trend toward consolidation throughout the industry.
