Following the script in more than a dozen other states, and after years of advocacy and several failed attempts, New York lawmakers have legalized adult-use marijuana, which is expected to create one of the largest markets in the country with projected revenues of nearly $2.5 billion. The Marijuana Regulation & Taxation Act permits adults 21 and over to both purchase marijuana and grow up to six plants in their home. Governor Cuomo’s office has stated that, upon full implementation, the adult-use program is expected to raise $350 million in taxes per annum and create 30,000 to 60,000 jobs across the state.1
While additional tax revenues and job creation will surely be embraced, the deal was about more than economics – in addition to directing funds to education and drug treatment, there is a focus on making amends in communities impacted by the war on drugs by reinvesting millions of dollars in sales tax revenue in minority communities each year, and reserving a significant portion of business licenses for minority business owners. It is expected to take at least a year before adult-use sales commence.
Meanwhile, the lower house of Congress in Mexico approved a bill earlier this month to legalize adult-use marijuana. Along with allowing adults to smoke marijuana, the bill would grant licenses for producers, ranging from small farmers to commercial growers, to cultivate and sell cannabis, in addition to allowing individuals to grow plants at home. Legalization has already been mandated by Mexico’s Supreme Court, and is broadly considered all but certain to win Senate and presidential approval making Mexico, with a population of over 125 million people and a significant tourism industry, poised to become the world’s largest legal market.2
Similar to the United States where legalization in New Jersey is expected to be a catalyst for legalization in neighboring states, we could see the same effect in South America. With the use of medical marijuana already being legal in much of South America, including Argentina, Brazil, Chile, Colombia, Paraguay, and Peru, and with nations worldwide searching for ways to create more jobs and increase tax revenues in a post-COVID economy, it would not be surprising to see legalization in Mexico ignite broader support for adult-use legalization across South America.
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Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility. The possession and use of marijuana, even for medical purposes, is illegal under federal and certain states’ laws, which may negatively impact the value of the Fund’s investments. Use of marijuana is regulated by both the federal government and state governments, and state and federal laws regarding marijuana often conflict. Even in those states in which the use of marijuana has been legalized, its possession and use remains a violation of federal law. Federal law criminalizing the use of marijuana pre-empts state laws that legalizes its use for medicinal and recreational purposes. Cannabis companies and pharmaceutical companies may never be able to legally produce and sell products in the United States or other national or local jurisdictions.
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