Legalized weed could create $6.5B market

California legalizing recreational marijuana could grow the industry there to $6.5 billion in 2020 — and also serve as a “watershed moment” for the industry in and outside the United States, according to a report released Tuesday.

Market research firms the Arcview Group and New Frontier delved into California’s massive and uniquely complicated cannabis industry to project its direction and what may be in store if voters pass Proposition 64 in November.

If the Adult Use of Marijuana Act succeeds and is implemented by 2018, California’s legal marijuana sales likely will climb by $1.6 billion within the first year, according to the Arcview and New Frontier market report.

That would put the state’s medical and recreational industry on track to hit $6.5 billion in revenue by 2020, up from $2.8 billion in 2015, according to the report.

To give a little perspective: The nation’s legal cannabis industry is expected to climb to $23 billion in 2020, up from $5.7 billion in 2015.

“We think the activation of the adult-use market in California will undoubtedly make California the new epicenter in cannabis,” said John Kagia, executive vice president of industry analytics for New Frontier.

The sheer size of the state — it ranks among the world’s top 10 economies — will help it maintain that status, Kagia said. Even with a fractured, unregulated medical industry, California accounts for nearly half of all the nation’s legal cannabis sales, Arcview and New Frontier reported.

But California’s influence as a market-mover goes far beyond its size, Kagia said.

“There’s going to be a professionalism of the industry, an emphasis on innovation once the market is legal in California that will dramatically accelerate the industry in a way that legalization (efforts) in Colorado and Washington haven’t been able to do.”

Silicon Valley should play a leading role, both via capital as well as technical and intellectual expertise, Kagia and co-authors wrote in the report.

California also is poised to be a leader in creating rules for social pot use, should become a front-runner in developing organic standards and likely will become a hub for cannabis research, as the Adult Use of Marijuana Act calls for 10 percent of sales tax collected to be spent on drug abuse research and another 10 percent on cannabis research, according to the market study. The ripple effects could be vast and affect industries such as biomedical research, applied materials and nutraceuticals, among many others, he said.

Additionally, if California goes recreational then it’ll apply greater pressure on Mexico to legalize, the authors wrote:

“The legalization debate south of the U.S. border has evolved quickly as illustrated by the evolution of Mexico’s President Enrique Peña Nieto who, in just six years, has transformed from one of Latin America’s most vocal drug warriors to a proponent of medical cannabis use and advocate for decriminalizing possession of up to an ounce for all adults. Legalization in California will only add fuel to the debate on cannabis law reform in Mexico and in other Latin American countries.”