Legal Marijuana: How Much Money is It Really Bringing in?

A man plants small seedlings of marijuana plants

A man plants small seedlings of marijuana plants | Lars Hagberg/AFP/Getty Images

2016 was a big year for marijuana. A number of states pushed through legalization measures, including four that will soon have fully legal markets for recreational consumers. A full four years after Colorado and Washington became the first states to pass recreational legalization ballot measures, things are moving along at a steady pace. There are some real threats to overcome, however, with a new administration taking the reins soon.

But if you’re trying to gauge the success of legalization thus far, you just need to take a look at the raw numbers. So far, the industry has shown remarkable growth and revenues.

A new report from Arcview Market Research — a firm which specializes in the cannabis industry — said that 2016 saw $6.7 billion in marijuana sales nationwide. In 2015, the market generated $5.4 billion in sales. That’s around a 30% year-over-year increase and is as explosive as any industry in the country. As one Forbes contributor noted, this is a rate of growth that is faster and larger than the dot-com boom.

The difference is that there’s no reason to think the bubble will burst on the marijuana industry. There’s a long way to go before the market even approaches saturation, especially when you consider that only about one-fifth of the American population has access to legal cannabis. With so much room to grow, it’s hard to imagine the industry’s growth slowing anytime soon unless the government interferes.

Marijuana: The $6.7 billion crop

Jars of cannabis in a shop

Jars of cannabis in a shop | Kevork Djansezian/Getty Images

With 2016’s $6.7 billion in sales and 2015’s $5.4 billion, the marijuana industry’s produced more than $11 billion in two years. This is remarkable for a number of reasons, particularly for an industry that is truly still in the incubation stage. The Arcview report forecasts a compound annual growth rate of 25%. That means that by 2021, the pot industry will be generating sales of more than $20 billion per year.

As The Washington Post reports, that would make it bigger than the NFL. This also assumes that we’ll continue to see state-by-state legalization, rather than a change at the federal level. If the federal government were to legalize marijuana for the entire country, sales could reach as high as $35 billion by 2020.

But there’s no reason to think that will happen. Though there are some real and justifiable worries about the incoming administration’s views on legalization, there have been no concrete indications one way or another as to what might happen. We do know that the likely incoming Attorney General Jeff Sessions isn’t particularly friendly toward cannabis. And the DEA has made recent moves to further entrench itself against legalization.

It’s hard, however, to ignore the numbers. Legalization has been a boon in the states that have managed to push through legislation, creating jobs and opening up new business opportunities. To pull the plug on it, at this point, doesn’t make much sense.

The forecast

Marijuana plants grow indoors

Marijuana plants grow indoors | iStock.com

The biggest reason the incoming administration might want to leave the industry alone is because of those numbers Arcview forecasts. A compound annual growth rate of 25%-30% would generate a lot of economic activity. And if there’s one thing we know about Donald Trump, it’s that he wants to take credit for spurring economic growth. Allowing cannabis businesses to flourish seems like an easy way to get results.

We also don’t know just how big of an impact the freshly legalized states will have on sales. Though the entire West Coast has legalized pot following this last election cycle, the East Coast, South, and Midwest are still almost entirely high and dry. Massachusetts and Maine (D.C. too, if you want to count it) are about to enter the fray, and it’ll be interesting to see how the industry establishes itself on the eastern seaboard.

If things go smoothly in Massachusetts and Maine, don’t be surprised if several other surrounding states make moves to push through legalization measures of their own. There’s a lot of money to be made, and a lot of tax revenue to be generated from a previously off-limits market.

The $6.7 billion made from marijuana sales in 2016 is a substantial figure. It shows that the industry is growing and that there is a ton of potential in pot. Heading into 2017, the big question is whether a Republican-controlled federal government will shut the whole thing down.

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