The 4 2020 Cannabis Forecast

2019 was a momentous year for the cannabis industry: Hemp-derived CBD had a heyday, Illinois made history, California got sticky, vapes were flung into flux, and North American cannabis companies received some harsh wake-up calls.

There's a well-worn saying within the cannabis business that the emerging industry is so fast-moving that it lives in dog years. Cannabis is already making headlines after Illinois began growing cannabis this year with recreational sales. Other states are inching closer to legalization this year -- with several mulling how best to make sure social equity. Also, in 2020, there's the FDA could chill the CBD craze, and a move from Congress could change the sport entirely.

The tumultuous past few months have set 2020 up to be a make-or-break year for a few of the most important within the business also because the many lesser-known players are priming to form their moves.

1. The next US states to legalize cannabis

Fourteen US states and territories have legalized recreational cannabis sales for adults (although regulations aren't fully cladding in places just like the District of Columbia and Vermont). A complete 33 states have legalized the cultivation of cannabis seeds for medical purposes.

Illinois will remain focused after it made history last year with the first legislatively enacted recreational cannabis program. Critical aspects of its program include social equity and social justice measures created to assist people and communities most harmed by the War on Drugs.

New York and New Jersey are flirting with legalization but have held off to navigate some logistics associated with aspects that include social equity. The governors of the latest York, New Jersey, Connecticut, and Pennsylvania convened this past fall for a summit on coordinating cannabis and vaping policies.

Other possibilities for states to legalize recreational cannabis might be Arizona, Delaware, Florida, Minnesota, Montana, New Mexico, North Dakota, and South Dakota. Even Alabama, Mississippi, and South Dakota could become new medical cannabis markets, and other states' medical programs could see expansions.

2. Federal legalization

Whether national legalization is on the horizon remains to be seen, said Walsh.

How federal agencies regulate hemp, a cannabis plant with under 0.3% tetrahydrocannabinol (THC), and derivatives like cannabidiol (CBD) might be extremely telling for a way the United States government might approach regulation of other sorts of cannabis down the road, he said.

CBD products are all the craze, but they'll get on shaky ground. CBD oils, creams, foods and beverages have seen an explosion in availability following the passage of the 2018 Bill, which legalized hemp but left much discretion to the US Food and Drug Administration, which regulates pharmaceutical drugs, most food items, additives, and dietary supplements.

The FDA is reviewing CBD and has yet to issue formal guidance. However, the agency has issued warning letters to CBD makers that make unsubstantiated health claims. Class-action suit lawsuits are filed against several CBD companies, including two of the most important, Charlotte's Web and CV Sciences, alleging they engaged in misleading or deceptive marketing practices.

Cannabis insiders are closely awaiting the fate of industry-friendly bills like the STATES Act, which might recognize cannabis programs at the state level, and therefore the SAFE Banking Act, which might leave banks to more efficiently serve cannabis companies. Those and other bills likely won't pass entirely, but some language may make it into more comprehensive legislation.

3. New regulation in older markets

In addition to the promise of the latest demands, the evolution of established cannabis programs could also play a significant role within the cannabis business landscape.

In California, the world's largest cannabis industry has developed in fits and starts. Regulators are aiming at an entrenched illicit market as businesses decry tax increases and native control measures that limit distribution.

And in Colorado, where the nation's first legal recreational cannabis sale happened, a slate of latest laws is poised to shift the cannabis landscape by allowing social consumption businesses and therefore the ability for out-of-state and publicly traded companies to have licenses.

4. New products come to Canada

Canada's "Cannabis 2.0" roll-out of derivative products -- like edibles, vapes, and beverages -- is in its beginning stages. The Canadian publicly traded licensed producers that are beset by missed and slow market development have bet heavily on these new product forms.

But it takes time for provincial and state cannabis programs to urge off the bottom, for businesses to return online and for production and provide to urge during a right balance with demand. So, any significant returns won't happen immediately, said Morgan Paxhia, director and co-founder of cannabis investment company Poseidon Asset Management.

Bottom Line

Overall, 2020 should bring volatility for cannabis companies in Canada and therefore the United States, he said, noting the industry's current trade cycle is mirroring that of the dot-com bubble and subsequent bust.

The capital constraints are expected to continue into the primary leg of 2020 as some initial bets don't pan out for a few companies, said Andrew Freedman, Colorado's former cannabis czar who now runs Freedman & Koski, a firm that consults with municipalities and states navigating legalization. Some companies' low points could create opportunities for other firms and investors that waited out the primary cycle. 

Natalie Gray is a Biochemical Engineer. She works in the Research and Development team that focuses on the design and construction of unit processes. She is a recreational marijuana supporter and her love for organic chemistry brought her to medical cannabis. She grows her own flowers, working on different projects and studies everything above and under cannabis roots.

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