It has been nearly 20 years since California passed Proposition 215, the landmark bill that created the nation’s first medical marijuana market. Since that time, 22 states and the District of Columbia have joined California in putting medical marijuana laws on the books, and two states, Colorado and Washington, have made marijuana fully legal for “adult” or “recreational” use.
Now, California appears ready to enter into a “Golden Age of commercialized cannabis,” with sales predicted to explode tenfold over the next five years, according to Silicon Valley News and marijuana research firm The ArcView Group.
“Once the medical marijuana industry is legalized statewide, and you legitimize the entire production and distribution of medical cannabis, the business will explode and the state would collect $400 million a year or more in sales taxes,” Nate Bradley, executive director of the California Cannabis Industry Association, told Silicon Valley News.
The ArcView Group’s report estimates that the legal marijuana market will be worth $2.6 billion this year, up from $1.3 billion in 2013. By 2019, when “recreational” use will likely be legalized, research indicates the market could be worth as much as $10 billion a year.
According to the report, analysts believe Colorado’s legal weed market is already worth about $253 million. That would be roughly the same amount of money generated strictly by the Bay Area marijuana market alone, according to the estimates of Dave Hodges, who manages the All American Cannabis Club in San Jose.
Dave Curren, a former Intuit engineer and the owner of Green Bits, a startup offering inventory management to legal pot shops, told SV News that now is the time to get involved in the industry.
“2016 will be the deciding year,” he said. “But it’s amazing how much stuff is happening in this space right now. If the momentum continues, this is going to be really big.”
The legal weed market still faces plenty of challenges; of course, marijuana is still classified a Schedule I drug under federal law, a classification that includes “drugs with no currently accepted medical use and a high potential for abuse” like heroin, ecstasy and LSD. As such, pot shops operating legally under California law are still subject to raids and seizures by the Drug Enforcement Administration.
Even states with fully legal weed like Colorado and Washington are running into problems with the federal government. While the Obama administration has so far declined to pursue legal action against the governments of the two states, the U.S. Bureau of Reclamation made sure to reiterate earlier this year that Colorado cannot use federal irrigation water to grow its pot. Additionally, while the House of Representatives voted in July to allow banks to accept deposits from marijuana businesses, the banks themselves are still hesitant to comply.
Still, despite legal weed’s uncertain future, fresh startups and entrepreneurs are lining up early to claim their corners of the business. Startup “Eaze” promises to be the “Uber of pot,” enabling door-to-door deliveries of medical marijuana to those with valid doctor’s notes, while “Weedly” offers a Yelp-like experience, where users can read reviews and preview marijuana menus from their favorite dispensaries.
Meanwhile, in Denver, two companies will host a legal weed startup convention in September, where over 100 pot-centric entrepreneurs and startups will vie to be the next big thing. Among the companies on display will be the “Tinder of marijuana,” an “ad network for cannabis,” and a “cryptocurrency to help the cannabis industry overcome banking challenges,” according to Fast Company.