Grow America Builders is headquartered in Chicago, so we took a particular interest in how recreational cannabis would be implemented in our home state.
There’s no need to rehash the ‘what you need to know’ about legal marijuana in Illinois; that’s been reported on ad nauseum.
Instead, we’re going to take a step back and look at the first month of legal marijuana in the Land of Lincoln and what’s to come now that the smoke has cleared (pun intended).
Supply & Demand
The biggest story so far has been the lack of supply.
It was no secret that demand was going to be through the roof once the calendar turned over to 2020.
January 1st came with uber excited customers braving sub freezing temperatures to wait in lines hundreds and sometimes thousands of people deep. Lines like this are only seen with a new iPhone release or sneaker drop.
Before the week was over, almost every dispensary in town was out of cannabis for recreational customers, turning hopeful consumers away in droves.
Dealing With a Lack of Supply
And while the lack of supply was disheartening, especially to those who thought to wait it out at home for a few days and come back later, it came as no surprise to those in the industry.
In fact, over the past year many insiders were telling us that Illinois should reschedule the date to late Spring when supply would at least have a fighting chance to keep up with demand.
This left many frustrated customers confused how their local dispensary could be out of cannabis after only a few days.
Why Is There A Shortage Anyway?
The answer is simple. Cannabis is still federally illegal, and therefore can’t be transported across state lines. All cannabis sold in Illinois must come from Illinois sources.
So while California may have the supply, and Illinois has the demand, California cannabis must stay in California. And keep in mind, up until last year, the Illinois cultivation centers were only set up for medicinal supply.
When the governor announced recreational cannabis would become legal on January 1, 2020, many wheels had to be set into motion: real estate had to be purchased for new grow houses, architectural plans had to be designed, permits obtained, and state approvals granted.
All of this had to occur before construction could even begin on the new cultivation centers. But crews have been working around the clock, fast and furious to get these new state of the art cultivation centers, labs and grow houses fully operational. In a few months, the fruits of all this labor will be coming to bloom in the form of new cannabis, ready for market.
An interesting by-product of recreational cannabis in Illinois is the rise in medical cards.
Under the former regulations, not only did it take months to obtain a medical card, but many people were left ineligible because of rigid restrictions. With the new recreational law, a patient can now obtain a medical card under much more relaxed guidelines and turn around times of less than 48 hours.
Why Do You Want A Medical Card
Why would an Illinois resident obtain a medical card if you could just walk into your neighborhood dispensary without one? The benefits of having a medical cannabis card are threefold…
First, you have priority access to a guaranteed supply of cannabis products, thereby avoiding the lines.
Secondly, medical patients will be able to purchase at a significantly reduced tax rate.
In fact, a medicinal marijuana card holder will be subjected to only a 1% state sales tax . For comparison, recreational users will be paying up to 25% tax on most cannabis products.
Thirdly, medical patients can grow up to five plants in their homes.
Impact on the Economy
But the only outcome that really matters, and the entire reason why cannabis is legal in Illinois is … money, money, money.
Illinois is one of the worst states in terms of debt. A recent report had Illinois’ current debt at 5.9 billion and on pace to hit 19 billion dollar debt by 2025. That’s billions with a B.
How Much Will Cannabis Help?
Is cannabis a ‘be all end all’ solution? No. So, what’s the bottom line? Just how much tax revenue will cannabis generate for Illinois?
Within the first 24 hours of becoming fully legal, Illinois cannabis grossed 3.2 million dollars. For comparison, Colorado’s initial 24 hour gross was 1 million dollars, which was considered a great success.
By the end of that first week in Illinois, consumers had spent 10.8 million dollars on cannabis.
Based on early calculations, cannabis tax revenue will generate almost 700 million dollars. That may not seem like a drop in the bucket when talking about a 6 billion dollar debt. But that’s 700 million more dollars that Illinois will have that it didn’t have a year ago.
Project that over the next decade, and Illinois’ balance sheet will look a lot better thanks to cannabis.
Month One In Review
Overall, the first month of recreational cannabis in Illinois came with no real surprises.
There was much more demand than supply, and revenue projections seem to be meeting or exceeding expectations.
It will be interesting to see how the market regulates itself once the supply starts keeping up with demand and legal marijuana becomes more of a regularity instead of a new trendy gimmick.