- After two failed attempts to legalize adult-use cannabis in 2019 and 2020, New York is trying once more to pass a recreational cannabis program.
- "I think this should've been passed years ago," Governor Andrew Cuomo said at a press conference on Wednesday. "I think too many people have been imprisoned, incarcerated, and punished."
- Cowen analyst Vivien Azer said that with a strong Democratic majority in the State Senate and a framework that outlines equity clauses, "there is a very good chance that NY will move forward with adult use legalization."
- The companies best positioned to benefit from New York turning recreational are the ones that are currently operating in the state, according to Azer, like Green Thumb Industries, Curaleaf, and Cresco Labs.
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New York is once again attempting to legalize adult-use cannabis.
The state has tried — and failed — twice already to pass a recreational cannabis program. But Gov. Andrew Cuomo announced this week his intention to move forward with a fresh plan.
"I think this should have happened years ago," Cuomo said at a press conference on Wednesday. "This is the year where we do need the funding, a lot of New Yorkers are struggling. This year will give us the momentum to get it over the goal line."
Legal cannabis could help fill New York's budget deficit
Pointing to a $15 billion state budget deficit brought on by the COVID-19 pandemic, Cuomo said the state was working to do its part to raise revenue through sports betting as well as enacting a recreational cannabis program. He said recreational cannabis would bring in $300 million a year to the state in a few years, once the program is fully established.
Cowen analyst Vivien Azer wrote in a Wednesday note that while previous efforts to legalize recreational cannabis in the state have failed, a strong Democratic majority in the State Senate coupled with a framework that outlines equity clauses point toward "a very good chance that NY will move forward with adult use legalization."
Read more: Here are the top 5 cannabis stocks to buy now to profit from a $6 billion wave of cannabis legalization across the Northeast, according to a top Wall Street analyst
Cuomo's cannabis proposal would limit adult-use cannabis to adults over the age of 21 and establish an "Office of Cannabis Management," which would oversee the state's medical, hemp, and recreational programs. It would also create programs and opportunities for minority entrepreneurs and others disproportionately affected by the war on drugs to enter the cannabis market.
The companies best positioned to benefit in New York are the ones that are already there
In such a case, Azer said, the companies best positioned to benefit are the same ones that are currently operating in the state: multi-state operators like Green Thumb Industries, Curaleaf, Cresco Labs, Columbia Care, Acreage Holdings, MedMen, and Vireo.
These companies have a "first mover advantage given their existing approvals and cultivation infrastructure," says Azer.
In New York, cannabis legalization has been a matter of "how" and not "if" for many years, as state lawmakers and activists have struggled to come up with a framework that would satisfy social equity clauses as well as create a lucrative market that would roll out quickly.
Cowen estimates that if New York were to follow neighboring states and legalize cannabis for adult use, it would contribute $40 billion a year to the US medical and adult use cannabis market by 2025, if recreational sales start by January 1, 2023.
By 2030, the US cannabis market could balloon as large as $100 billion, according to Cowen.
Read more: Gov. Andrew Cuomo announced his intent to legalize marijuana in New York
Analysts have long predicted that if one of the major states in the Northeast legalizes cannabis, others would soon follow. New Jersey voted to legalize recreational cannabis in November, and the substance is also legal for all adults in Vermont, Maine, and Massachusetts.
A 'domino effect' in the Northeast could pressure states to quickly roll out recreational cannabis programs
Azer said in a September note that New Jersey legalization and state budget pressures related to the coronavirus pandemic could create a "domino effect" that would accelerate legalization in the region and pressure states like New York, Pennsylvania, Connecticut, and Rhode Island to follow suit.
"Given the high rates of disposable income in the state, and strong tourism historically, we believe that NY can become one of the largest cannabis markets in the U.S," said Azer.
Read more: Democrats' big victory in Georgia is the best possible outcome for the cannabis industry. Here's the ultimate guide to marijuana legalization: the key dates to know, and which stocks could benefit the most.
Cuomo's announcement comes the day after Georgia's Senate runoff elections, in which both of Georgia's Democratic candidates won their Senate seats, according to projections from Insider and Decision Desk HQ, meaning Democrats will control the upper chamber when President-elect Joe Biden takes office. That's expected to provide a major catalyst for the US cannabis industry.
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