In June 2019, Illinois legalized adult-use cannabis and became the 11th state in the US to do so. However, it was the first state to legalize marijuana through the legislature. The legislation allowed the sale of recreational cannabis starting on January 1, 2020.
As reported by ABC 7 News in Chicago, an Illinois resident older than 21 can possess 30 grams of marijuana, edibles that contain up to 500 milligrams of THC, and 5 grams of cannabis concentrate products. Meanwhile, an adult visitor can possess half these quantities.
Illinois has a strong start
Let’s look at the state’s cannabis sales for the first five days of the law’s implementation. On the first day, recreational sales in Illinois stood at $3.2 million from 77,128 transactions.
On its first day of legalization, Oregon posted revenues of $3.2 million in 2015, while Colorado generated sales of $1 million in 2014. Illinois had opened 37 dispensaries on the first day, according to Toi Hutchinson, the governor’s senior advisor for cannabis control.
As the week progressed, cannabis sales fell. On January 5, Illinois’s recreational marijuana sales fell to $1.2 million from 30,954 transactions. There were reports of dispensaries running out of recreational cannabis. The state mandated the dispensaries to maintain inventories of 30 days at all times for medical patients.
In the first five days, Illinois had sold $10.8 million worth of recreational cannabis products from 271,169 transactions with an average of $40 per transaction.
An outlook of the retail footprint in Illinois
As reported by Patch, Illinois has 55 medical dispensaries. The state authorized all existing medical dispensaries to receive a new license to sell recreational cannabis. Illinois plans to issue an additional 75 licenses on May 1, 2020. The state allotted a period from December 10, 2019, to January 2, 2020, to receive applications for the second round.
As reported by Time magazine, Hutchinson stated that the second round would be vital, as it provides an opportunity for people who had been disproportionately impacted by marijuana arrests. He added that these candidates would receive extra points during the application process. Further, they would have access to special funding.
As reported by CNBC on January 1, cannabis products are taxed based on THC content. The state assigned a 10% tax for marijuana products with less than 35% of THC. It imposed a 25% tax for products with more than 35% THC content. Meanwhile, Illinois imposed a 20% tax on cannabis-infused products.
Marijuana Business Daily expects Illinois’ recreational cannabis market to reach $2.5 billion per year. CNBC reported that Colorado consulting firm Freedman and Koski estimated that the cannabis sector could generate $440 million–$676 million of tax revenue for the state.
The performance of the marijuana sector
The marijuana sector has been going through a rough phase. Since the beginning of 2019, the ETFMG Alternative Harvest ETF (NYSE:MJ) fallen 34.9% as of January 8. During the same period, the Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ) has fallen by 40.3%.
Mounting operating losses, thriving black market sales, the slower opening of new stores, and vaping-related deaths could have dragged the sector down. Prominent cannabis players Aurora Cannabis (NYSE:ACB), Canopy Growth (NYSE:CGC), and Cronos Group (NASDAQ:CRON) have lost 64.7%, 29.7%, and 39.8% of their stock values, respectively.
However, we expect more states opening up to cannabis could revitalize the sector. The introduction of Cannabis 2.0 products could also act as a catalyst. For more, please read Did the Cannabis Sector Bottom Out in 2019?
Please visit 420 Investor Daily for more marijuana-related news and updates.