The Year in Weed: Despite some rough patches, cannabis made advances

0
WAITING GAME Until federal legalization passes, uncertainty will haunt the legal-weed business, in California and across the country.

Since 2012, when Washington and Colorado legalized pot for adult use, every year has been eventful for cannabis. But the biggest story of 2021 might be something that didn’t happen: federal legalization. The same thing might happen next year.

Still, legalization at the state level continued its inexorable march forward. Four states legalized weed for adult use: New York, Connecticut, Virginia and New Mexico. Alabama, meanwhile, approved a medical-marijuana law. Together, those states are expected to generate sales of about $5 billion a year. Efforts in other states stalled: Kansas, South Carolina, Nebraska and Montana all decided against legalization, at least for the time being.

There are bills in Congress to legalize weed at the federal level, but they stalled this year, and the outlook for next year is still uncertain at best. Most observers believe it will have to happen soon, however. As 2021 comes to a close, pot is legal for adult use in 18 states and counting. Most of the rest of the country allows medical cannabis, and in only four states—South Carolina, Oklahoma, Idaho and Wyoming—is pot still illegal in any form. Seven more states allow only CBD products.

Locally, the biggest story of the year was the horrifying crime spree that targeted cannabis businesses in the Bay Area—and Oakland in particular—on the weekend before Thanksgiving. Dozens of businesses were broken into or robbed. The losses, including stolen cash and merchandise, as well as damage, amounted to about $5 million. Over a two-week period, 25 businesses in Oakland alone were broken into, including dispensaries, distribution facilities and manufacturing operations.

The spree echoed one that occurred in 2019, when carloads of burglars hit dozens of businesses during the protests over the police killing of George Floyd in Minneapolis. In that case, too, the crime was concentrated in the Bay Area, and Oakland in particular. But in all, more than 40 businesses were hit up and down the West Coast.

In between those two events, and after the pre-Thanksgiving wave, one-off crimes against Oakland cannabis businesses continued apace. In response, owners of cannabis businesses have demanded that the city improve its police response and reduce or eliminate cannabis sales taxes in order to help them pay for additional security.

On the consumer front, the emergence of Delta-8 THC products was perhaps the biggest story of  2021. When people speak of THC, they usually mean Delta-9. When the federal government legalized hemp in 2018, the law specified that hemp could not be sold if it contained more than 0.03% Delta-9 THC, because then it would be considered marijuana. That specificity created a gaping loophole. Companies, many of them of the fly-by-night variety, started selling hemp-derived Delta-8 THC products, often through the mail. Much of the demand came from states where cannabis is banned or is allowed for medical use only. States haved moved against Delta-8, and the market is beginning to shrink, especially after the feds outlawed the sending of vape products of all kinds—including nicotine—through the mail.

The pot business in California was buffeted in 2021: on one hand, falling wholesale prices, high costs, high taxes, crime, the continued refusal of most local governments to issue cannabis licenses and the continued dominance of the illicit market; on the other hand, demand is strong and growing. If some of those problems can be addressed, 2022 could see a rebound for pot businesses in the state.

But until federal legalization passes, uncertainty will haunt the legal-weed business, in California and across the country. The market is still vastly underserved, and yet many of the country’s biggest pot companies record profits this year, even as their stock prices fell—thanks largely to Congress’s inaction on the legalization front.

In general, observers of the legal-cannabis business remain bullish, even as they acknowledge the many challenges. The trade publication MJBizDaily reports that legal weed contributed $92 billion to the U.S. economy this year. It forecast that next year that figure will reach about $120 billion. That’s about the same size as the U.S. video-game industry.