The coronavirus pandemic has slowed a number of states’ efforts to legalize cannabis, at least in the near term. It could have the opposite effect in 2021.
Canaccord Genuity analyst Bobby Burleson in December pointed to 16 states that he expected to put pot legalization on their ballots this election year. That list has since dwindled as Covid-19 has dominated officials’ attention, slowing down ballot initiatives across the nation.
Burleson thinks such a slowdown may be temporary. He points to budget shortfalls in states forced to shut down, especially ones that have been weighing legalization already, as motivation to legalize cannabis for tax revenue.
He cites a study of 38 states from the Center on Budget & Policy Priorities, which forecasts an aggregate state budget shortfall of 10% in the fiscal year that ends on June 30. Of the 27 where the projected tax revenue shortfall is expected to be 10% or more, nine have discussed cannabis reforms in 2020.
“We expect budget concerns to prompt resurgent legalization efforts for these and other challenged states,” he wrote.
It’s not just cannabis that stands to benefit from states’ need to make up for budget shortfalls—those upbeat about online sports gambling point to potential traction for that industry’s own legal efforts.
U.S. pot stocks include Trulieve Cannabis (ticker: TRUL.Canada), Curaleaf (CURA.Canada) and Green Thumb Industries. Constellation Brands (STZ) owns a controlling stake in Canadian grower Canopy Growth (CGC). Canopy has a deal to acquire Acreage Holdings, but that only triggers when the drug is legal at the federal level.
Write to Connor Smith at connor.smith@barrons.com
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