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Biros' Blog

Emerging Cannabis Markets: The California Gold Rush

By Aaron G. Biros
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California has enjoyed legal medical marijuana for almost two decades, giving the state one of the greatest head starts in the industry. States like Colorado, Washington, and Oregon have since legalized recreational use for adults and passed legislation providing for state regulation of the industry.

For the past two decades, California’s medical marijuana market lacked strict, enforceable regulations, allowing for a black-market-mentality to remain prevalent.

However, that could all change with a 2016 ballot initiative that would legalize recreational use for adults along with more regulations for medical marijuana. I have noticed a schism developing in the cannabis industry, with some clamoring for more regulations to ensure safety and traceability, and others fearing over-regulation and big business involvement.

In the interest of advancing legalization efforts nationwide with mainstream acceptance, I think regulations that address traceability, testing, and safety are important to jettison the cannabis industry into a legitimate spotlight.

Since Deputy Attorney General James Cole issued a memorandum on Guidance Regarding Marijuana Enforcement, known as the Cole Memo, in 2013 on behalf of the U.S. Department of Justice, federal priorities have moved away from clashing with legal state marijuana markets, giving a sense of security to those established in the industry. California is the world’s eighth largest economy, just behind Brazil with a GDP of more than $2 trillion, and the cannabis industry can benefit greatly from the passing of the 2016 ballot initiative.

Colloquially known as the “Wolf of Weed Street”, Jason Spatafora, founder of MarijuanaStocks.com and CEO of FBEC Worldwide, Inc. believes that the marijuana market in California could be on par with the tech boom. “Previously, California’s medical marijuana laws might as well have been recreational, but as the state introduces new legislation we will see heavy expansion with companies getting into the recreational market, leading to increasing growth and production, which requires ancillary businesses to support that growth,” he says.

“It is not just the private market that will benefit, the public sector will soon be on par with Colorado when tax revenue begins to grow,” says Spatafora. “California is the most populated state in the country, [and] new legislation will really change the landscape of the cannabis market.”

Matt Karnes, founder and managing partner of GreenWave Advisors, LLC, believes that while implementation of new rules would not go into effect until 2018, the process will be facilitated by existing infrastructure expected to be established for medical marijuana. “We are conservative in our estimates for 2016 and expect that California’s legal medical marijuana market will grow 15% to approximately $2 billion from the 2015 estimate of $1.8 billion,” says Karnes.

According to Karnes’ figures, we can expect both markets to grow considerably over the next five years, leading to a $7.61 billion total marijuana industry in California by 2020.