Fitch Ratings: Pot legalization movement bringing revenue growth in cannabis-legal states
Despite an uncertain political landscape, one of America’s biggest credit rating agencies expects what it describes as “measurable – and in some cases substantial” revenue increases in states where cannabis has been legalized.
According to a new report by Fitch Ratings, states with cannabis legalization have the potential to see “decreased public safety costs, including reduced arrests, prosecutions, and jail-time.”
Other positive financial impacts can come from a regional decline in opiod abuse.
Fitch says tax revenues are “most significant” in states with recreational, adult-use cannabis; a market that the report says could easily overshadow the medical marijuana sector given the rising number of recreational consumers. Cannabis taxation, according the report, currently starts at around 10-to-20 percent, due to the combination of state and local taxes, but can go as high as 50 percent.
The report also focuses on revenues in the cannabis-legal states of Colorado and Washington. Those revenues, it notes, while “initially short of expectations, have ultimately exceeded estimates measurably.” At the same time monthly growth rates have slowed recently; suggesting maturing cannabis markets in those states.
In terms of risks, Fitch points to price declines in the legal cannabis market, as well as a stronger black market due to legal cannabis taxation.
Company officials acknowledge the risk of federal intervention in the legal cannabis industry has risen in recent months; due in part to calls by U.S. Attorney General Jeff Sessions for increased enforcement in cannabis-legal states.
But Fitch Director Stephen Walsh said support for cannabis legalization is growing across the United States.
“The recent trend of state legalization of cannabis shows no sign of abating, while congressional support appears strong for the Rohrabacher-Blumenauer Amendment, which limits the ability of the U.S. Justice Department to enforce drug laws in states where medical cannabis is legal,” he told Blunt Network.
And Walsh said the state-by-state legalization movement is already having an impact on the federal government’s approach to cannabis legalization. “More than one in five Americans lives in a state where non-medical cannabis is now legal,” he added, “and the federal government doesn’t have many options for reversing that, even if they are able to find the political will.”
“We expect further incremental changes in federal policy,” he continued, “with de-scheduling a possible next step, but the timeframe for such shifts is difficult to predict in the current political environment.”
And even if the Trump Administration should go ahead with a crackdown on cannabis legalization, Walsh said Congress is unlikely to support efforts to prohibit the rapidly-growing legal medical market – which is finding greater acceptance among American consumers.