Editor's note: Map and data from CBT. Analysis below from Brightfield Group.
The past 12 months have changed the landscape of the legal cannabis industry in the US. Michigan, Illinois, and Maine began adult-use sales, and all cannabis measures on state ballots passed on election night, including adult-use measures in New Jersey, Montana, Arizona, and South Dakota.
The map on this page may help predict future legislation changes, as mature medical markets tend to pass adult legalization. States with high numbers of registered medical cannabis patients are more likely to have just passed (MI, IL, AZ, NJ). Oklahoma’s unique medical market is already operating similarly to an adult-use market. Following this thread, it appears that Florida, Maryland, Pennsylvania, New York, and Ohio will likely legalize recreational use in the next couple of years.
Looking at Illinois predictably demonstrates that states which initially only allow for dual-use programs without a significant increase of new licenses have underwhelming adult-use sales due to supply shortages. Though both consumers and patients have equal access to retail facilities, patients have first access to most products and are typically treated to better pricing. Couple these factors, which are ongoing though less prescient than when the market initially opened, with the state's large sales tax on adult-use products likely means medical consumers are unlikely to shift to the adult-use market. Not just that, these factors are driving people who were previously not registered to the medical market instead of the adult-use market. Though adult-use is growing, the growth of medical alongside it demonstrates Illinois's market is still not meeting the demands of heavy users with qualifying conditions. This is also exasperated by the fact that Illinois's patient population was small prior to full legalization, less than 1% of the state's overall population, so the medical market had yet to reach maturity in the first place.
Michigan, on the other hand, has lower prices across the board, a less steep tax structure, and does not struggle with the same issue of under-supply. Couple these factors with its higher rate of overall patient enrollment, indicative of a mature medical market, and the patient count has decreased following the legalization of adult-use, despite the fact that there are still more retail facilities available to serve the medical community. Regulations and licensing really do make a difference when it comes to the health of an adult-use market, and patient counts should decline following full legalization if everything is done effectively to maximize overall access.
Pennsylvania and Florida are both key medical states to watch and are set to have the largest market sizes by 2025. Pennsylvania still licenses relatively few dispensaries as compared to its population and the state's patient count has grown rapidly since sales began in early 2018. Florida, which saw sales commence around the same time, has a similarly large population and expanding patient count, albeit with nearly triple the number of dispensaries as Pennsylvania. Other states with decently sized populations and average-to open-levels of regulations, such as Arizona and Maryland, will also constitute a significant portion of the overall market growth over the next five years.
As of September 2020, the COVID-19 pandemic has not negatively affected medical cannabis patient registrations and, in fact, actually spurred many to receive recommendations from their doctor and stop by their local dispensary for curbside pick-up or get delivery (where available). Virtually all medical markets (where adult-use is prohibited) are continuing to set record sales numbers on a month-by-month basis, indicating that patients do view their medical cannabis as essential and that the medical market is largely recession-proof.
Though Oklahoma has a significantly smaller population than the other top medical states (less than half of Arizona's population), its hands-off regulatory system and liberal list of qualifying conditions have allowed it to punch well above its weight. The state has over three times the number of dispensaries as California and also has a plethora of cultivators and manufacturers, making product extremely cheap while ensuring that patients from all over the state can find a retail location within a few miles of their home. Less populous states which choose to adopt Oklahoma's style of regulations will be able to scale rapidly and constitute a sizable portion of the market.
Medical cannabis is seen overwhelmingly positively by much of the country, even by more conservative individuals who may remain opposed to adult-use legalization. As ordinary citizens make their voices heard and talk to their elected officials, policies are likely to shift. In the face of legislatures that refuse to act, ordinary people organizing ballot initiatives have proven to be a driver behind new market openings. Half of the states which began sales in 2019 only have medical cannabis programs due to the organizing efforts of citizens in their states, and the newest medical market opening, Utah, also legalized because of citizen action.