An ETF For The Next Wave Of Cannabis Gains

The 10 largest cannabis firms in the U.S. are expected to generate US$5.5 billion in sales this year, up from $3.3 billion last year.

Top-line revenues are expected to grow at a 50%-100% clip with 30%-40% gross margins for the next few years. Multi-state operators, or MSOs, are seeing the bulk of the action.

In March 2021, legislation was introduced in Mexico that could make recreational cannabis legal. This comes only months after Mexico issued regulations for medical marijuana. Legalization there, with 130 million citizens, would make it the largest legal recreational market in the world.

The U.S. market, of course, would be at least twice as large. But the ganja is still a no-no in the freest country in the world. But that might not last much longer now that the Mexican domino is falling.

Indeed, the U.S. seems primed to begin legalizing cannabis at the federal level. Key senators have said as much. But more importantly, key industry — and, therefore, lobbying — groups are now giving their blessing, and even advising how it should be rolled out.

The alcohol industry, for example, has now taken its stake in cannabis. The Wine and Spirits Wholesalers of America (WSWA), whose members distribute more than 80% of all wine and spirits sold at wholesale in the U.S., is now advising how the government should roll out legalization.

The Marijuana Revenue and Regulation Act, introduced two years ago by Senator Ron Wyden, has already proposed putting the Alcohol and Tobacco Tax and Trade Bureau in charge of cannabis instead of the Drug Enforcement Agency — a seemingly de facto de-scheduling.

The bill would allow states to regulate retail licenses and proposes taxing cannabis similar to alcohol — when it leaves the producer or importer, and at a higher rate for THC potency.

Surely the end of national cannabis prohibition is nigh. And even if it doesn’t come under Biden’s watch, the emergence of dominant multi-state operators (MSOs) is already at hand.

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