Legal weed demand to create opportunity for outsiders
Communities hurt by ‘War on Drugs’ should see equity in legalization
By Ted Cox
A new study on the expected demand for legal pot in Illinois creates an opening for firms on the outside looking in on the existing medical-marijuana market.
The study, commissioned by state Sen. Heather Steans and state Rep. Kelly Cassidy, both of Chicago and lead sponsors for legalization, says demand for legal weed figures to outstrip what the current medical-marijuana firms can provide.
“A Snapshot of Demand for Adult-use Cannabis in Illinois” projects that demand for legal weed in Illinois will ultimately be between 350,000 and 550,000 pounds a year. It states: “Illinois can expect the existing medical-cannabis market to have the capacity to supply between 35 percent and 54 percent of the mature, adult-use market, subject to the caveats and assumptions listed in this report.”
One of the stated goals of legislators seeking to legalize marijuana in Illinois is to use the economic gains to repair some of the damage done to communities hit hardest in the “War on Drugs” launched by the Reagan administration and carried on into this century.
“For generations, government policy of mass incarceration increased racial disparities by locking up thousands of individuals for marijuana use or possession,” said state Sen. Toi Hutchinson of Chicago Heights, another chief co-sponsor, in a statement released with the report. “Now, as we are discussing legalization, it is of the utmost importance that we learn from these mistakes and acknowledge the lingering effects these policies continue to have in neighborhoods across this state. No conversation about legalization can happen absent that conversation.”
Cassidy has said that’s key to her concept of legalization. It should also benefit all local communities, including those downstate.
“It’s also about local ownership. It’s about fostering economic development in all sorts of communities,” Cassidy said ahead of this year’s new legislative session. “Access to the industry and the repair-of-harm component related to communities impacted by the War on Drugs is hugely important — and frankly is the hill I’m willing to die on. It is my motivating force.”
Cassidy reaffirmed that with the release of the study. “It is important that we work together to establish an adult-use cannabis market that works for everyone,” she said in a statement. “We’re contemplating additional license categories such as craft cultivation, transportation, and processing to ensure that everyone is at the table. These will create space for more innovation and entrepreneurship in the industry, but more importantly, provide opportunity for more diversity in an industry with a pressing need for it.”
“We’re not just trying to add diversity because it looks good,” said state Rep. Jehan Gordon-Booth, of Peoria. “It’s not just diversity for diversity’s sake. It’s for equity’s sake. Equity includes economics, it includes criminal justice. We’re talking about specific communities that need to be made whole. When this is all normal and nice and people are making money, we will not have succeeded if black people and other people of color are shut out.”
Firms already licensed to deliver medical marijuana in Illinois always figured to have a leg up in entering the legal market. Mitch Kahn, chief executive officer of Grassroots Cannabis, has said he’d welcome the addition of firms benefiting communities that bore the brunt of the “War on Drugs,” insisting, “We absolutely agree with that.” Other entrenched medical-marijuana companies, however, have suggested they’d like to keep it to themselves.
The study projects that that’s not possible, especially as those firms will have to place a priority on providing medical marijuana to patients who need it — a demand that likewise figures to grow as marijuana gains more widespread acceptance. It states: “If existing medical-cannabis companies are used as the first entrants into the adult-use cannabis industry, the state must be sensitive to those companies’ continued role as meeting the needs of medical-cannabis patients and the expected growth in the medical program.”
Extrapolating demand from states that have already legalized, like Colorado, the study projects that Illinois will eventually raise between $444 million and $676 million in annual revenue. Gov. Pritzker said last month in his first budget address that it would bring in $170 million just in the first year.
The study cautioned, however, that those larger estimates will not be achieved instantaneously. “The state should expect initial demand in the adult-use cannabis market to be significantly lower than the demand of a fully mature market, as consumers, businesses, communities, employers, and others adjust to a new policy reality,” it stated. “Such ramp up of demand has been seen in previously legalizing states.
“The state should expect initial market dynamics to keep prices above criminal market pricing, and subsequently some consumers will prefer the criminal market,” it added. “In the longer term, but still within the first few years, initial regulatory costs will decrease, economies of scale will push prices down, and the regulated market will capture or displace the criminal market. These market dynamics should be taken into account when considering tax rates and limitations on product variety.”
Colorado has seen a great benefit in tax revenues, but California has yet to see the legal market cut into the black market.
The study was performed by the consulting firm Freedman & Koski, and Steans welcomed its findings.
“While we should not expect cannabis sales to be a one-stop solution to Illinois’ financial woes, it is encouraging to see evidence that we are on the brink of establishing a thriving, robust industry to meet the demands of many Illinoisans who have until now been turning to the criminal market,” Steans said. “Prohibition does not work, and legalizing adult-use cannabis will bring those sales into the light and meet an obvious demand among the people of our state.”