Week’s In Review: Criticism Mounts Over New York’s Social Equity Cannabis Fund for High Costs and Limited Impact; Arizona to Launch Recreational Cannabis Home Delivery; DeSantis Uses Opioid Settlement Funds for Anti-Cannabis Ads Ahead of Ballot Initiative

LOS ANGELES — Welcome to the far too-exciting world of cannabis and psychedelics, where it’s a tale of two markets with some states doing amazingly well. And some, well…they’re not doing so well (hello New York). Let’s get to it! 

Cannabis Industry Highlights

#1) Criticism Mounts Over New York’s Social Equity Cannabis Fund for High Costs and Limited Impact: New York’s Social Equity Cannabis Investment Fund, a public-private initiative launched to support individuals disproportionately affected by cannabis prohibition, has faced growing criticism over its high operating costs and limited results. Since its establishment in 2022, the fund has managed to open only 21 dispensaries, despite an initial target of 150 locations. This performance has sparked public scrutiny, particularly regarding the $1.7 million in combined salaries paid to the fund’s management team over the past year, which includes NBA Hall of Famer Chris Webber.

#2) Arizona to Launch Recreational Cannabis Home Delivery: Starting November 2024, Arizona will permit home delivery for recreational cannabis, marking a significant shift in state policy. The Arizona Department of Health Services has approved this expansion, previously limited to medical cannabis patients. Now, residents aged 21 and older can receive home deliveries facilitated by licensed dispensaries or partnered third-party services.

#3) AICPA Calls for IRS Guidance on Cannabis Tax Policy Amid Potential Rescheduling: The American Institute of Certified Public Accountants (AICPA) is calling on the IRS and Treasury Department to provide updated guidance on tax policy for cannabis businesses in light of a potential rescheduling of cannabis to a Schedule III substance. This change would relieve these businesses from the restrictions of Section 280E of the tax code, which currently prevents them from taking standard business deductions. If rescheduled, cannabis businesses could deduct ordinary expenses, significantly lowering their effective tax rates, which are currently among the highest for U.S. industries.

#4) DeSantis Uses Opioid Settlement Funds for Anti-Cannabis Ads Ahead of Ballot Initiative: Florida Governor Ron DeSantis’ administration has drawn attention for using opioid settlement funds to finance an anti-cannabis campaign. The Florida Department of Children and Families reportedly allocated $4 million for advertisements discouraging cannabis and other drug use, coinciding with a broader push against Amendment 3—a ballot initiative aiming to legalize recreational cannabis for adults.

#5) U.S. Cannabis Market Growth Reaches $50 Billion as Industry Grapples with Worker Unionization Efforts: The U.S. cannabis market is on track for substantial growth, with projections indicating retail sales could exceed $50 billion annually within the next several years. In 2023, combined medical and recreational cannabis sales were estimated at around $33.6 billion, with significant growth expected as additional states legalize recreational use and expand medical programs. Current estimates suggest the market could hit $38.5 billion by the end of 2024 and grow to over $53 billion by 2027 as more states open legal markets and consumer access improves

#6) Industrial Hemp Market Poised for Growth, Projected to Reach $25 Billion by 2032: The industrial hemp market is projected to grow substantially, with a forecasted compound annual growth rate (CAGR) of 17.29% through 2032, reaching an estimated value of $25.33 billion. This growth is primarily driven by favorable shifts in regulatory policies that have supported hemp cultivation, a rising awareness of hemp’s environmental benefits, and its expanding applications across numerous industries. The U.S. Department of Agriculture reports that, as of 2023, 54,152 acres were dedicated to industrial hemp cultivation nationwide, with a market valuation of $712 million for hemp produced in open fields.

#7) Green Dragon and Eaze to Close Operations Amid Financial Challenges and Industry Downturn: Green Dragon, a multi-state cannabis operator with facilities in Colorado and Florida, is set to cease operations by the end of 2024. This move will affect all 17 of its dispensaries in Colorado and 39 in Florida, alongside layoffs impacting 59 workers in Colorado and 113 in Florida. The shutdown follows Green Dragon’s acquisition by Eaze Technologies in 2021. However, Eaze, once a prominent California-based cannabis delivery company valued at $700 million, has also faced significant financial setbacks, including asset foreclosure in August 2024 after defaulting on a substantial loan.

Psychedelic Sector Update

1#) Massachusetts Ballot to Decide on Psychedelics Legalization in November: Massachusetts voters are set to decide on a significant measure this November with Question 4, a ballot initiative to legalize certain plant-based psychedelics, including psilocybin, mescaline, and dimethyltryptamine (DMT). If approved, Massachusetts would follow Oregon and Colorado in creating a regulated framework for adult psychedelic use, focusing on mental health applications.

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