Look around, and you'll struggle to find an industry hotter than marijuana.
Back in 1995, not a single state had a law on its books legalizing medical cannabis or recreational pot. But following the November elections, in which residents in eight out of nine states voted in favor of their state's marijuana initiative or amendment, there are now 28 states with legal medical cannabis laws and eight recreational weed states.
This legalization explosion is best explained by the changing tide in public opinion toward marijuana. National pollster Gallup found that support for marijuana's legalization is at a new all-time high of 60% in 2016 (up from 25% in the mid-1990s). An additional 84% of surveyed Americans would like to see medical cannabis legalized nationally, according to a CBS News poll in 2015. The more favorable the public's opinion toward marijuana, and the more states are able to demonstrate that they can safely and effectively regulate their pot industry, the greater the likelihood that other states will legalize as well.
The potential growth behind marijuana is incredible. Investment firm Cowen & Co. believes that legal marijuana sales could soar from $6 billion today to $50 billion by 2026. That's a compound annual growth rate of nearly 24% over the next decade. But, the most phenomenal growth can be seen in pot industry employment.
Marijuana Jobs Growing Like Weeds
According to CNBC, the marijuana industry currently employs about 150,000 people nationwide. This figure is, by itself, outstanding. Back in 1994, Dale Gieringer, a doctor working with California NORML, extrapolated the job-creating capacity of the weed industry and settled on a figure of 100,000 jobs if the drug were legalized nationally. We've only seen recreational pot legalized in a handful of states, and medical cannabis was only legal in half of all U.S. states heading into the November elections, yet we're already 50% above Gieringer's forecast with full legalization from a little over two decades ago.
However, we could just be getting started. According to analyst estimates, the marijuana job market could double or triple in the years to come, meaning 150,000 to 300,000 additional cannabis-related jobs could be filled in the near and intermediate terms.
Remember, the cannabis industry extends beyond just growing, processing, and bud-tending at the retail level. Job opportunities are flourishing in security (since most banks refuse to deal with marijuana-based businesses, cash is still king), courier and delivery services, regulation, web and software development, consulting, and marketing. In fact, CNBC notes that roughly 400 students have enrolled in a 12-course program offered by the Northeastern Institute of Cannabis in Natick, Massachusetts that'll potentially jump-start their career in the cannabis industry. As with any industry, employment pay can vary, but managers and shop owners can certainly make six figures under the right conditions.
Major Challenges Still Ahead
Yet in spite of the rapid growth of the marijuana industry and its flourishing job market, there are still plenty of hurdles for the industry to conquer.
First and foremost, there's that not-so-tiny problem of cannabis being a schedule 1, and therefore illicit, substance at the federal level. Marijuana remaining illegal at the federal level sets cannabis businesses up for some substantial disadvantages. As noted earlier, very few banks want to deal with marijuana-based businesses despite their $6 billion in estimated legal sales in 2016. This is because they fear the possibility of federal prosecution at some point in the future. As mentioned earlier, marijuana companies are stuck using cash in many instances, which is a security concern and a potential growth inhibitor.
Pot businesses also face tax disadvantages. The IRS bars businesses that sell federally illegal substances from taking normal tax deductions. Ultimately, cannabis businesses get stuck paying tax on their gross profits rather than net profits. Having less of their profits left over means less potential for hiring and slower growth.
Secondly, the marijuana industry has to deal with the transition of the Obama administration out of office and the start of the Trump administration. Though Donald Trump has pledged his support to medical marijuana "100%," and he's of the opinion that states should have the right to regulate their own industries, his pick for Attorney General, Jeff Session (R-Ala.), suggests the industry could feel some pushback. Sessions is arguably the biggest opponent of pot in the Senate. During a Senate drug hearing in April, Sessions focused on the rise in traffic deaths related to marijuana in select states where the drug is now legal as a cause for concern. It's unknown at this time if Sessions will look to tighten federal regulations once he takes office, but it's a clear possibility.
The marijuana industry is also facing a Catch-22 that could slow its growth. In one scenario, cannabis remains federally illegal and faces the challenges that have been described above. In the other scenario, cannabis is rescheduled to schedule 2 and becomes legal to be prescribed nationally by physicians. While this might sound great, it would also place marijuana under the strict regulation of the Food and Drug Administration.
If rescheduled, the FDA would have the power to control marketing and packaging of medical cannabis products, and it would likely visit marijuana grow farms on a regular basis to ensure they're meeting THC consistency and grow quality standards from batch to batch. More importantly, the FDA would have the authority to require marijuana businesses to run clinical trials to confirm the medical benefits of cannabis for certain ailments. In other words, the regulatory costs of legalization could soar, potentially crippling smaller businesses.
Before we go and claim the pot industry is the greatest growth prospect in the business world, we should understand that this other side of the equation very much exists, and it could stifle investment for at least the next couple of years.