Cannabis expert: N.J. vote could be tipping point for region

Wilson, of ETFMG, feels ‘yes’ would put pressure on Pa., N.Y. — and give N.J. 1st shot at industry that could see well over $70M in monthly revenue

Ahead of the results of Tuesday’s vote on adult use of recreational marijuana in New Jersey, an industry expert says the Garden State is possibly deciding what the appetite is for cannabis in the entire tri-state region.

Jason Wilson. (File photo)

Jason Wilson is a cannabis research and banking expert at the exchange-traded fund issuer ETFMG, which runs the world’s largest cannabis ETF, ETFMG Alternative Harvest ETF, or MJ. He expects that, if Jerseyans vote to amend the state constitution to legalize the consumption and possession of marijuana for those over the age of 21, Pennsylvania and New York won’t be too far behind.

“I believe New Jersey could be a major tipping point for the entire tri-state area,” he said. “I would expect if New Jersey does vote ‘yes,’ it’s going to put a lot of pressure on New York and Pennsylvania to move toward doing the same, or else suffer some tax leakage and missed opportunities.”

In the interim, between New Jersey putting in place a law that spells out how adult use of marijuana will work in the state and those neighboring states doing the same, the pot investing expert said it’s a virtual certainty that the Garden State will be attracting out-of-state dollars.

And lots of them.

As an example of that, Wilson pointed to the revenues that have emerged from the newer markets in places such as Michigan and Illinois. He said those states have been pulling up to $70 million a month in sales and deriving significant tax revenues.

“But, if you look at those states, the vast majority of their sales are in-state revenues and not out-of-state revenues,” he said. “That’s going to be a very different story in New Jersey, which might for some time be the only state in the tri-state metropolitan area that has legalized.”

The question of whether New Jersey would start paving the way to a recreational use program was added to the ballot by the state Legislature late last year, after several failed attempts to legalize marijuana through legislation. Legalization was a cornerstone of Gov. Phil Murphy’s 2017 gubernatorial campaign, but only the state’s existing medical marijuana program has been expanded under his administration.

The ballot measure is a vote to amend the constitution, which means lawmakers will still have to come up with an appropriate legal framework for how the recreational market will work; part of that is determining if the licenses needed for cultivation and sales on the medical marijuana side will simply be expanded on for these sales.

Pollsters such as Fairleigh Dickinson University say likely voters are voicing their support for the ballot measure by a 2:1 ratio. Back in 2018, the same polling institution said support was beneath a majority.

“The overarching theme in this industry is normalization,” Wilson said. “We’re seeing a global growth in sales and more political and social movements backing this all the time. There are 33 states that have already legalized medical marijuana (and 11 that have legalized it for adult recreational use). There are five states with this on the ballot, and polls suggest all five will move to do this.”

The other states considering cannabis on November ballots are Arizona, South Dakota, Montana and Mississippi.

And the presidential election is its own form of referendum on the fate of pot.

Wilson said the Democratic Party platform has made it clear its intent is to decriminalize marijuana use. The hope from the industry’s advocates is to reschedule it from its current designation as a Schedule I narcotic, which is a massive hurdle to creating a scalable market.

Legislation relating to this industry could take many different shapes under a Joe Biden and Kamala Harris administration, Wilson said. And there are some bills already waiting for action in Congress.

“I would assume, come 2021, there will be talk of that legislation moving forward,” he said. “Whatever legislation comes in very likely has to include social equity and social justice provisions as well.”

However, even if President Donald Trump were reelected, experts suggest it’s not a direct rebuttal to those pushing for the growth of this industry. In the past four years, the country’s legal cannabis sales have expanded more than at any other time. There also has been a tremendous influx of capital and investor interest in the industry, with ETFMG’s MJ fund reaching $600 million in assets.

The ETF, which represents a portfolio of global companies in the cannabis supply chain, did see a spike in that interest — an increase of three times its normal activity — after the vice presidential debate, during which Harris vowed to decriminalize pot. The fund overall is up about 10% from the beginning of the fourth quarter of this year.

In New Jersey, Wilson said there’s been a special appeal in the legalized marijuana market due to the downturn brought by COVID-19. As Murphy has himself argued, Wilson believes there’s enormous value in bringing in revenue sources and job growth to the state as the global pandemic strains both.

And if it doesn’t pass?

The Garden State vote, while potentially influential for neighboring states, wouldn’t soil the marijuana movement as a whole, Wilson said.

“It’s really hard to imagine a reversal of the progress on this issue that’s already been seen,” he said. “The genie is out of the bottle. The public has spoken. You already have a supermajority of the U.S. population living in states that have legalized. Public opinion polls continue to support legalization. And tax revenues from sales have proven to be strong.”