A majority of people are looking toward the future of the US legalization of cannabis at a federal level. While no one has a crystal ball for the future, I chatted with top business minds in the industry to get their opinions on what legalization could look like in the US five and then ten years down the road. Part one included insights from Jocelyn Sheltraw of Headset with some fascinating data points.

Kerry Jordan, CFA, Co-founder and Managing Partner of Supercritical, LLC, and Sparky Rose, Co-founder and Managing Partner of Supercritical, LLC offer their perspectives about where the cannabis industry will be in five and ten years, respectively.

Let's hear their thoughts:

TCR: Do you believe full US legalization will occur within the next 5 years? If yes, what sector do you think will dominate in the future and why? ( ie. Edibles, drinks, flowers, etc.) If not, why do you feel that way

Kerry: "I do not believe that full US legalization will occur within the next 5 years, but I do think that eventually the prohibition will be lifted. In the United States, marijuana use was legal until the early 20th century. Then, between 1916 and 1931, 29 states banned its use, and shortly thereafter, the Marihuana Tax Act of 1937 made cannabis illegal across the United States. Today, 36 states and the District of Columbia have legalized marijuana use in some way. Both medical and recreational marijuana use, however, remains federally illegal, as the Controlled Substances Act of 1970 classifies cannabis as a Schedule I drug. This classification, which is reserved for substances with no accepted medical use and a high potential for abuse, is in opposition to the known medicinal benefits of marijuana and is anachronistic. Moreover, nearly 70% of Americans support legalization, according to a recent Gallup survey, which is an all-time high. However, less than 50% of Republicans and conservatives support legalization. As more red states vote to enact marijuana legalization, and Americans’ acceptance grows, partisan support for federal legalization will increase, and federal policy will change."

Sparky: "A couple of years ago, I’d say it was close to a slam dunk. I’d have said that this past October! Now, I’m not so sure. One thing is relatively certain, and that is that it is happening. The question is, when? Before the 2020 election, I thought legalization would happen during the Biden presidency. However, the Democrats didn’t win by the margins expected, and COVID is still a huge part of everyone’s daily life, so I’m not sure cannabis legalization will rise to the legislative priority necessary to get a vote during the Biden presidency.

Furthermore, it appears as though the Republicans are hell-bent on stopping any Democratic legislation from passing, irrespective of whether it’s good or whether it’s popular. So, do I think it will happen in the next five years? Unfortunately, no, I do not. For once, however, I don’t believe this is due to marijuana = bad (finally!) but, instead, due to a combination of once-in-a-lifetime events that requires the full attention of the government added to the divisive political polarization in this country.

And although I don’t think we’ll see federal legalization in the next five years, if we do, I don’t think we 100% know what the dominant sector will be. However, I can tell you everything you need to know about it. The dominant sector in cannabis will be the one that can deliver a consistent and predictable experience in a convenient and discreet package. I think the beverage and sublingual sectors are the ones to watch as the technology required to produce these form factors offers rapid onset and offset times for better titration and more predictable results.

Beverages, when compared with inhalable, are discreet. Likewise, beverages are also quite convenient compared with other forms of cannabis as they do not require any additional paraphernalia. Beyond open and drink, there are no complicated instructions or rituals."

Kerry Jordan, CFA, Co-founder and Managing Partner of Supercritical

TCR: What issues do you believe might need to be addressed yet for us to reach an equitable resolution toward legalization?

Kerry: "It’s time for a change. There are myriad issues that need to be addressed in order to reach a beneficial and equitable resolution. The most important and immediate concerns in the uneven legal and regulatory environment include:

1. Rescheduling marijuana
2. Decriminalizing marijuana
3. Removing banking barriers
4. Dedicating more resources to scientific research of cannabis
5. Providing more support to individuals and communities that were systematically and disproportionality impacted by the war on drugs"

Sparky: "It depends on what you mean by equitable resolution and for whom? One way to look at it is through the eyes of legislators, another is through the eyes of the public, and another is through the eyes of the industry. I won’t take up legislators because if I’ve learned one thing in life, it’s that you can never trust a politician, so there’s no basis from which to work. Politicians make decisions based on re-election, not reality.

As for the public, I’m not sure the public, outside of medical patients who genuinely rely on cannabis to maintain a quality of life, really cares about federal legalization. I’d venture to guess that most states whose citizenry has a strong desire for legal cannabis have some form of legal cannabis in their state already. And let’s remember why we have so much cannabis legalization in the US today. It’s sure as hell not because the citizenry collectively decided that we’re compassionate to those with serious illness in this country, and it’s not because we’ve collectively agreed that weed isn’t that bad. It is and has been, under no uncertain terms, a last-ditch effort to raise funds in states where they’re feeling a financial crunch, like Illinois. And it’s abundantly clear when you look at the tax policies put in by states legalizing cannabis. If there were a real desire to protect the kids’ or citizens’ health and safety, we wouldn’t tax cannabis nearly as much because high cannabis taxes push consumers to the unregulated black market. Countless examples support this outcome, but legislators still enact draconian policies under the guise of protecting citizens when it’s little more than virtue-signaling to their base to get reelected.

The bottom line is that as long as limited licensure exists and the government (state, local, federal, or otherwise) taxes the bejeezus out of cannabis, we’ll never have an equitable resolution toward legalization. You need to reduce friction to allow individuals who have the right to purchase, consume, and possess cannabis to get what they need safely and efficiently before you can squash the black market and have meaningful cannabis reform. Suppose states manage tobacco under the same regulatory structures you see in cannabis. In that case, you’d have just as much illegal tobacco growth and criminal tobacco arrests and incarcerations as you do with cannabis. You’d have more because nicotine is physically addictive (like alcohol and heroin), whereas cannabis is not."

Sparky Rose, Co-founder and Managing Partner of Supercritical, LLC

TCR: How large do you believe the total US cannabis market will be within 5 years?

Kerry: "According to research from leading cannabis data provider, BDSA, the legal cannabis market in the United States will grow to $47.5 billion by 2026. That number seems to be on the low side to be given the aggressive growth rates in newly legalized states and the significant size of the populations of soon-to-be legal states. Moreover, the illicit, or legacy market, in the United States balloons the near $50 billion 5-year forecast to over $100 billion by 2026."

Sparky: "BDSA projects that the total US legal cannabis market will hit $47.5B by 2026. I think that might be a little low, but not by much. I’d probably cap it at $50B. I believe their NJ, NY, and IL projections are a touch low. When you talk about the entire US market, including the legacy market, I think by 2026, you’re looking in the $120B arenas."

TCR: Within the current trajectory of the US cannabis markets, where do you see the US cannabis market in 10 years?

Kerry: "By 2032, I expect that the United States will have a very robust and fully legalized cannabis market. I think that today’s large consumer products companies will embrace and integrate cannabis and other cannabinoids into mainstream products like skincare, pet supplies, health supplements, food, and beverages. I also envision that more industrial, household and apparel products will be made with hemp fiber, and I see all categories of products having a significant sustainability component to them."

Sparky: "Full legalization across the US. Perhaps 2-3 multi-state agreements to allow cannabis to cross some state lines. I could see cooperation between California, Oregon, Washington, and Nevada. New York, New Jersey, Pennsylvania, Massachusetts, and Connecticut. Maybe even something in the Mid-Atlantic? Perhaps after 10 years, you might see cannabis crossing all state lines; it’s too hard to say. However, one thing that’s for sure is that if the US allows cannabis imports, the global cannabis game will turn on its head and not in a good way for companies solely operating in the US. The US simply cannot compete on a cost basis with international producers who benefit from more amenable climates, less environmental regulation, lower wages, and less democratic authorities that may be more easily corruptible."

Forward into the Future

How will cannabis legalization actually play out? Only time will tell. If we had a Magic 8 ball we could perhaps ask it some questions and glean a haphazard response. The real world doesn't work quite the same way. We make educated predictions based on available data at the time.

We thank our friends from Supercritical, LLC for enlightening us with some forward-looking cannabis factors and the most relevant data from BDSA.

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