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Will Pennsylvania see profit with the legalization of pot?

(Thinkstock)
(Thinkstock)

For the 23 states and the District of Columbia that have legalized marijuana for medical and, in three cases, recreational use, there have been plenty of stories of money to be made in growing or dispensing the drug – which had been illegal in most parts of the nation since the 1930s.

And the Keystone State may be next.

The Pennsylvania State Senate last month voted to support the legalization of marijuana for medical uses in specific and limited health conditions, and Gov. Tom Wolf has said he will sign the bill if the House concurs.

That surely has many existing and potential marijuana industry entrepreneurs keeping a close eye on the state with visions of great profits dancing in their heads.

The first state to decriminalize marijuana for recreational use was Colorado. Chris Walsh, editor of Marijuana Business Daily, said the state has seen a windfall in corporate and tax revenue since the 2013 action.

“It’s been big for them,” Walsh said. “They’ve seen $1 billion [in sales] in Colorado in 2015 alone, plus there have been tens of thousands of new jobs, and thousands of new businesses have cropped up. It’s creating business opportunities, as well as job creation.”

Not only did growers and sellers make money, but ancillary businesses also reaped the profits, Walsh said.

Firms ranging from architects and construction contractors who designed and built dispensaries, to security companies and law offices, have gained new business from the booming industry.

Could Pennsylvania be raking in that kind of revenue if the medical marijuana bill passes?

That’s a tough question to answer, Walsh said, but the likely answer is “no.”

He’s not saying there isn’t money to be had, but the publication, which was founded in 2011 and is the oldest marijuana-business publication in the nation, has witnessed success and failure for those attempting to enter the nascent industry.

The most important factor in how much money there is to be made on the legal sale of marijuana is how those sales are regulated.

Colorado has what is likely the most liberal marijuana sales, and so has been the most financially successful.

Walsh said the other decriminalized states have varying degrees of oversight, limits and accepted uses for the drug that can have a large effect on startup costs, volume of sales and ultimate profitability.

Louisiana, for example, could be considered the nation’s 24th state to legalize marijuana, but Walsh said his publication doesn’t count it because its regulations are so strict that combined with the fact that marijuana is still illegal at the federal level, real-world sales just aren’t practical.

Some states have a high cost of entry, with fees for marijuana sales or growing licenses costing tens of thousands to hundreds of thousands of dollars.

Coming up with that capital can be difficult because those in the industry also can have trouble finding a bank willing to make a loan connected with a controversial industry. Many even find they can’t get a bank to let them open a depository or checking account, making many marijuana businesses fragile cash-only endeavors.

Other factors include for what medical conditions physicians are allowed to recommend marijuana.

The proposal so far in Pennsylvania is fairly restrictive, compared to some other states.

Limited conditions such as cancer, HIV and AIDS, glaucoma, multiple sclerosis, post-traumatic stress disorder and epilepsy are among covered uses.

In California, which has a more liberal definition of marijuana-treatable conditions, a person can ask a doctor to recommend marijuana for something as simple as a headache.

Other regulations that could affect sales volume and profitability include in what form the drug can be sold. In some states, marijuana can be sold in its smokable form or as an edible, but the Pennsylvania bill, as it stands, will only allow it to be sold in pill, oil and liquid form.

That’s a restriction, Walsh said, that could decrease sales.

But it’s not just regulations to consider, it’s competition, he said.

In some areas where marijuana sales were legalized, there was a rush to market that created a glut. Some in the industry barely broke even and some failed.

But with marijuana sales, as with any new industry, Walsh said the weaker businesses will always, ultimately be weeded out – so to speak.

For anyone putting money into the marijuana industry, likely it will be a long-term investment, he said.

He said the tide is rising and more states are considering legalizing marijuana for at least medical uses.

As marijuana becomes more acceptable to the general public – which it already is, according to Walsh – he expects many states will also legalize it for recreational use, which is what occurred in Colorado.

He said he believes the day isn’t long off where most, if not all, states will allow marijuana in some form, so the wait may be worth it for investors.

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