A year ago, we wrote that based on cannabis legalization momentum at the state level, federal recognition was inevitable, but the timeline for it was unpredictable. Here we are, heading into a new year, and our viewpoint has not changed. Over the past year, state legislators enacted over 50 laws liberalizing marijuana policies in more than 25 states. This includes the passage of new laws in Connecticut, New Jersey, New Mexico, New York, and Virginia legalizing adult-use cannabis possession and regulating retail cannabis markets. Now, 18 states —comprising nearly one-half of the U.S. population —have laws on the books regulating adult-use cannabis production and retail sales.
Established markets in California, Washington, and Colorado continue to grow and mature as new capital enters the market. In California, the expansion of local jurisdictions allowing cannabis retail means that over 100 retail licenses will come online over the next 12 months. Total spending in California, the largest individual cannabis market in the world, is expected to hit $7.1 billion in 2024, representing nearly 23% of all U.S. cannabis sales.
Meanwhile, the emerging adult-use cannabis markets in New York and New Jersey have been described as “an entrepreneur’s dream,” with estimates that the potential market will soar to more than $6 billion within five years.
A growing cannabis industry means increased complexity for nearly every player. While banking this industry offers compelling financial benefits, such as new low-cost deposit growth, non-interest income, and the potential for earning assets, it comes with a high regulatory burden. Likewise, as cannabis-related businesses get larger and more complex through vertical integration, mergers and acquisitions, or outside investment, banking services, and cash management tools that can grow with them and support their changing needs are becoming even more essential.