What was looking like a potentially slow year for pot stocks a few months ago has sped into a furiously good start to 2021.
New York marijuana legalization is now being openly pushed by Governor Andrew Cuomo, meaning that one of the most powerful politicians in the country, in the one of the richest states, is putting his weight behind pot legalization.
The future of the legal cannabis industry lies within America. That is, when federal U.S. marijuana legalization eventually arrives, we’ll see a massive breakout for pot stocks.
Cuomo tweeted the following on January 11:
We will legalize adult-use recreational cannabis, joining 15 states that have already done so.
This will raise revenue and end the failed prohibition of this product that has left so many communities of color over-policed and over-incarcerated.
(Source: “Twitter post,” Andrew Cuomo, January 11, 2021.)
The state is hoping to bring in $300.0 million in tax revenue after New York pot legalization is instituted.
“I’ve supported [legalization] for years,” said Cuomo in a recent interview. (Source: “Cuomo Vows New York ‘Will Legalize Adult-Use Recreational Cannabis‘,” The Hill, January 11, 2021.)
“I’ve tried to pass it, but this is a year where we do need the funding, and a lot of New Yorkers are struggling. So I think this year will give us the momentum to get it over the goal line.”
He added, “Not only will legalizing and regulating the adult-use cannabis market provide the opportunity to generate much-needed revenue, but it also allows us to directly support the individuals and communities that have been most harmed by decades of cannabis prohibition.”
Whatever you may think of Cuomo personally or politically, what is undeniable is that he’s a major player in the Democratic Party and, to some, considered a potential future presidential candidate.
As governor of New York, he wields an immense amount of power over the state. Therefore, his full-throated support of marijuana legalization means that the safe money is betting on legalization coming to the Empire State sooner rather than later.
Attempts at legalizing pot in New York State have previously failed due to disagreements in the state legislature over how the tax revenue would be allocated, but those kinds of institutional and bureaucratic problems seem unlikely to derail things this time.
What’s more, there’s a very important indicator that marijuana investors need to pay attention to: the push for federal U.S. marijuana legalization amidst the pandemic.
U.S. Marijuana Legalization & the Coronavirus
I have to admit that, with all the media attention being turned away from pot and onto the global virus destroying our way of life, I figured that marijuana legalization in the U.S. would be put on the back burner. A once-in-a-century pandemic is something that even the most ardent supporter of marijuana legalization would agree should take precedence.
But one thing I overlooked in that analysis was that state governments have been losing billions of dollars since the pandemic began. After all, entire industries, like restaurants and entertainment, have been shut down. That’s a whole lot of payroll tax and sales tax (for the states that have it) being missed out on.
All that lost tax revenue has had a substantial impact on state coffers. As Cuomo puts it, marijuana legalization is a great way to start making up some of that lost tax revenue.
I’ve written many times before that vice industries like alcohol and pot typically don’t suffer during a pandemic or economic downturn. Considering that, in many places, alcohol and marijuana (where legal) vendors are considered essential services, there’s a lot of justification in expecting that pot sales would be unhindered—or perhaps even bolstered—by the pandemic.
So what we may experience is a rolling wave of marijuana legalization in the U.S., with New York State leading the way. Many other states with dwindling tax revenues could also turn to weed legalization to help supplement their funds.
And even if that doesn’t happen and we don’t see a groundswell of pot legalization in the U.S., New York alone would be a major victory.
Remember that New York is the fourth most populous state and third largest economy in the country. If it were to secede from the U.S., it would be the 10th largest economy in the world.
In other words, there’s a lot of potential for massive revenue gains from investing in pot stocks that have a stake in the New York marijuana market.
And that brings us, once again, to my two favorite U.S. marijuana stocks: Innovative Industrial Properties Inc (NYSE:IIPR) and Curaleaf Holdings Inc (CNSX:CURA, OTCMKTS:CURLF).
Chart courtesy of StockCharts.com
IIPR stock and CURLF stock have been surging over the past two months. What’s more, those gains are showing little sign of slowing down.
With progress toward New York pot legalization and the potential for huge revenue growth—on top of the already decent prospects for the weed industry in 2021 as the pandemic continues and people have little else to spend their cash on—there’s a very good situation for marijuana stocks going forward.
The marijuana market is looking stronger than it has in years.
We have politicians with serious power who are pro-legalization. We have a pandemic and economic situation that practically begs people to partake in cannabis. And we have a growing movement for social justice that calls for marijuana legalization as a necessity for the country.
All this combines to create an atmosphere of excitement for pot stocks that we haven’t seen in a long while. With investors picking up on all these good signs, they can anticipate potentially large jumps in share value in the coming months.