Report: Marijuana Market One Of The Country's Fastest Growing, Hindered By Federal Raids

As observers of the industry have probably noticed, the legal
marijuana market is exploding. As observers have likely also
noticed, its spectacular growth has been seriously hindered by the
federal government’s enforcement of prohibitionist policies in
states where medical marijuana is legal. A recent study by ArcView
Research, a “leading national network of investors looking to
capitalize on the legalization of marijuana,” details predictions
for just how much the market will continue to expand, which states
will legalize it next, and the specific ways in which the federal
government is stomping out growth.

The group’s researchers
surveyed hundreds of medical marijuana dispensaries, ancillary
business operators, and independent cultivators, in addition to
analyzing publicly available data. According to the Executive
Summary of the report, which was made available for download
earlier this week, the marijuana market looks promising to
investors, but still faces some significant challenges from the
Feds.

Legal Marijuana Market is Huge and Growing
Fast

Currently, the U.S. national legal marijuana market value is
assessed at $1.44 billion. It’s projected to grow by 64% to reach
$2.34 billion in 2014. By comparison, the smartphone market
grew 46.5% from 2012 to 2013.

According to the
Huffington Post:

“Cannabis is one of the fastest-growing industries,” said Steve
Berg… editor of the report. “Domestically, we weren’t able to find
any market that is growing as quickly.”

While it’s important to note that smartphones surged in
popularity long before medical marijuana became a viable industry,
and global sales numbers for 2012-2013 don’t offer a direct
comparison to 2013-2014 domestic estimates, Berg said his goal was
to illustrate just how rapidly the cannabis market is expanding by
offering familiar data points. 

The report also claims that the five-year national market has
the potential to balloon to $10.2 billion—a more than 700% increase
above the current value. This growth will come from both increased
demand in existing state markets and new venues in the 14 states
that are expected to have legalized recreational marijuana sales by
then. Specifically, the report predicts that within five years
Alaska, Oregon, Rhode Island, New Hampshire, Vermont, Maryland,
Hawaii, Maine, Missouri, Massachusetts, Nevada, Arizona, California
and Delaware will have legalized marijuana for adults.

Federal Policies Are Curbing Growth

According to the report, “around $500 million was shifted back
to the illicit market from legal channels following federal
enforcement actions against certain operators in legal marijuana
states in 2011 and 2012.” In California alone, the Feds have helped
to shut down at least 150 dispensaries since 2010.

The report is optimistic though—based on the DOJ’s
recent memo and expert testimony—that the Obama administration
will scale down or even cease federal raids on legal marijuana
businesses in states with tight regulatory systems.

Additionally, the report lists business risks stemming from lack
of access to banking services (due to
a federal law that prohibits banks from doing business with
controlled substances distributors) and tax accounting
restrictions.