For many proponents of legalizing marijuana, snuffing out the black market and bringing all that revenue into the state coffers was a big motivation. However, the truth is the black market has thrived alongside state legal weed, and in many cases has actively undermined and drawn profits from the legal market. With the coronavirus pandemic in full swing, though, illegal cannabis sales have been hit. Hard.
In the early days of the pandemic, it was established that COVID-19 was a respiratory disease and folks with poor lung health were more at risk of developing severe symptoms. As beneficial as marijuana can be, smoking is harmful and puts your lungs in danger. People are still consuming marijuana during this period, though, they’re just getting it from a different, more trustworthy source.
“It’s understandable that people may be more hesitant to get their products from sources that are unregulated. They may not want to go to their dealer’s house, or they may not want to have their dealer come into their house at a time when people are social distancing and not supposed to be interacting with people that they don’t know,” says Kris Krane, CEO of 4Front Ventures, which operates dispensaries in multiple states.
Back in May, Mitch Baruchiwitz, managing partner at cannabis investment firm Merida Capital Partners, argued in a paper that the pandemic was ‘cannibalizing’ the illegal market. “The vast majority of the current growth in the cannabis space is being driven by consumers transitioning from the black market to the legal market,” he wrote.
With millions of Americans stuck at home waiting for the virus to die out, plenty of them have been consuming marijuana to alleviate their stress and anxiety. However, marijuana from the illegal market is unregulated and the quality cannot be assured. Consumers want high quality, properly regulated products and they have started turning to the state legal cannabis market to get their fix. According to New Frontier Data, revenues are expected to hit $17 billion this year, a 25% increase from last year’s figures.
As the coronavirus pandemic puts an immense strain on the economy, states may choose to legalize cannabis sales to beef up their budgets. Krane points out how the government ended alcohol prohibition soon after the Great Depression to boost revenues.
“Alcohol prohibition was largely ended as a result of the Great Depression, as the country was in desperate need of new sources of revenue. It went from something that was seen as politically impossible to a political necessity in a very short amount of time, and I think we’re seeing a similar situation here.”
Analysts think entities like Sugarmade, Inc. (OTCQB: SGMD) are glad that this pandemic has had the unexpected positive effect of denting illicit pot sales.
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