Virginia’s cannabis market potential
Virginia is poised to become the first state in the South to legalize recreational cannabis, after the state legislature passed a bill in February 2023 that would allow adults 21 and older to possess, cultivate, and purchase cannabis from licensed retailers starting in January 2024. The bill also establishes a regulatory framework for the production, distribution, and taxation of cannabis, as well as social equity provisions to address the harms of past prohibition and criminalization.
According to a recent report by the Joint Legislative Audit and Review Commission (JLARC), Virginia’s cannabis market could generate up to $1.5 billion in annual sales and $274 million in tax revenue by the fifth year of legalization. The report also estimates that legalizing cannabis would create more than 11,000 jobs in the state and reduce law enforcement costs by $9.5 million per year.
The JLARC report also suggests that cannabis could become Virginia’s biggest cash crop, surpassing tobacco, soybeans, and corn in terms of value. Based on the projected demand and supply of cannabis in the state, the report estimates that Virginia could produce about 400,000 pounds of cannabis per year, worth about $1.2 billion at wholesale prices. This would make cannabis the most valuable agricultural commodity in the state, surpassing tobacco, which was worth about $435 million in 2020.
The benefits of legalizing cannabis
Legalizing cannabis would have multiple benefits for Virginia, according to the proponents of the bill. Some of the benefits include:
- Reducing racial disparities in cannabis arrests and convictions. According to the JLARC report, Black Virginians are more than three times as likely as white Virginians to be arrested for cannabis possession, despite similar rates of use. Legalizing cannabis would eliminate the criminal penalties for possession and expunge the records of those who have been convicted of simple possession in the past.
- Creating new economic opportunities and revenue streams. Legalizing cannabis would create a new industry that would generate jobs, income, and tax revenue for the state and local governments. The JLARC report estimates that the state could collect up to $274 million in annual tax revenue from cannabis sales by the fifth year of legalization, which could be used to fund public education, substance abuse prevention and treatment, and social equity programs. Additionally, legalizing cannabis would create new opportunities for farmers, entrepreneurs, and workers in the cannabis industry, especially for those who have been disproportionately impacted by cannabis prohibition.
- Protecting public health and safety. Legalizing cannabis would regulate the quality, potency, and safety of cannabis products, as well as prevent underage access and impaired driving. The bill would establish strict testing and labeling requirements for cannabis products, as well as limit the amount of THC (the psychoactive component of cannabis) that can be sold in certain products. The bill would also prohibit the sale of cannabis to anyone under 21, and impose penalties for providing cannabis to minors or driving under the influence of cannabis. Furthermore, legalizing cannabis would reduce the illicit market and the associated violence and crime that comes with it.
The challenges of legalizing cannabis
Legalizing cannabis also poses some challenges and risks for Virginia, according to the opponents of the bill. Some of the challenges include:
- Increasing cannabis use and abuse. Legalizing cannabis could increase the prevalence and frequency of cannabis use among adults and youth, as well as the potential for cannabis dependence and addiction. According to the JLARC report, cannabis use among adults in Virginia could increase by up to 23% after legalization, and cannabis use among youth could increase by up to 8%. The report also warns that cannabis use could have negative effects on mental health, cognitive development, and respiratory health, especially for heavy and frequent users.
- Impacting other industries and sectors. Legalizing cannabis could have adverse effects on other industries and sectors in Virginia, such as tobacco, alcohol, pharmaceuticals, and health care. According to the JLARC report, cannabis legalization could reduce the demand and revenue for tobacco and alcohol products, as some consumers may substitute cannabis for these substances. Legalization could also affect the demand and supply of prescription drugs, especially opioids, as some patients may use cannabis as an alternative or complementary treatment for pain and other conditions. Additionally, legalization could increase the demand and costs for health care services, such as emergency room visits, substance abuse treatment, and mental health care, due to the potential harms and complications of cannabis use.
- Facing legal and regulatory uncertainties. Legalizing cannabis could create legal and regulatory conflicts and complexities for Virginia, especially with the federal government, which still classifies cannabis as a Schedule I drug under the Controlled Substances Act. This means that cannabis remains illegal at the federal level, and that federal laws and agencies could interfere with the state’s cannabis industry and policies. For instance, cannabis businesses and consumers could face difficulties accessing banking and financial services, traveling across state lines, or obtaining federal grants and benefits. Moreover, legalizing cannabis would require the state to establish and implement a comprehensive and effective regulatory system for the cannabis industry, which could pose administrative and operational challenges for the state and local authorities.
The future of cannabis in Virginia
The bill to legalize cannabis in Virginia is currently awaiting the signature of Governor Ralph Northam, who has expressed his support for the legislation. If signed into law, Virginia would join 15 other states and the District of Columbia that have legalized recreational cannabis for adults. However, the bill also includes a reenactment clause, which means that the legalization provisions would have to be passed again by the legislature in 2024, before they can take effect. This gives the lawmakers and the public more time to review and amend the bill, as well as to study the impacts and outcomes of legalization in other states.
The legalization of cannabis in Virginia would mark a historic shift in the state’s attitude and approach towards the plant, which has been prohibited and stigmatized for decades. It would also open up new opportunities and challenges for the state’s economy, society, and public health. Whether cannabis would become Virginia’s biggest cash crop remains to be seen, but it is clear that cannabis would have a significant and lasting impact on the state’s future.
