Voters in Arizona, Montana, New Jersey, South Dakota, and Mississippi approved to relax marijuana laws on Tuesday. Curaleaf CEO Joe Lusardi joins Yahoo Finance’s Zack Guzman to discuss why more states are looking to legalize recreational marijuana and weigh in on the outlook for the cannabis industry.
ZACK GUZMAN: The CEO of Curaleaf, Joe Lusardi, joins us now for more on that. And, Joe, we talked about this last year in the Yahoo Finance Business of Cannabis special. You called New Jersey as the next state to legalize marijuana. Of course, it came on election night. So talk to me about the opportunity there since I know you guys already operate in New Jersey with dispensaries. So what does it look like to us?
JOE LUSARDI: Yeah, couldn’t be more excited about New Jersey. You know, it was a cannabis landslide on Tuesday. 67% of the voters in New Jersey passed adult use, and we’re really set up to create thousands of new jobs, bring hundreds of millions of tax revenue to the state.
Curaleaf is the leading operator in the market. We’re tripling our capacity, which will come online early in Q1. So we expect 2021 to be a really phenomenal year for Curaleaf and the cannabis industry.
And also I think it’s important to say, Zack, that the knock-on effect from New Jersey I think is going to be significant. You know, you’re going to be looking at a state creating a lot of tax revenue, a lot of jobs. And I think New York and Pennsylvania and Connecticut are going to have to look very seriously at their cannabis policy so they’re not left behind.
ZACK GUZMAN: Yeah, I was going to ask you about that too because there seems to be this pro/con when you look at the benefits of New Jersey, Arizona, these other states coming on board. There’s obviously reasons to believe that’s going to be a big catalyst for the sector.
On the flip side, we’re still watching to see how the Senate’s going to shake out because Democratic control there would have boosted the idea you might get Kamala Harris’s plan to legalize marijuana at a federal level passed. With Republican control, it looks a little bit shakier there.
So how does that maybe impact the industry? How do you square those in maybe trying to gauge where you should be putting new investments, new money to work here as a CEO?
JOE LUSARDI: Yeah, you know what? The industry just keeps marching on at the state level. 1 in 3 Americans now live in a state that has adult use. Those numbers will go up next year or the year after, and so we’re just going to continue to focus on high-population centers. We’re absolutely confident that cannabis will continue to get approved state after state, and eventually the federal government will get in line with the way that people think. But for now, we just keep marching on state by state.
Arizona had a big win. They’re going to go adult use. Those sales will start in April. That will also create thousands of jobs and tens of millions of tax revenue for school, police departments, community colleges. This issue is not going to get less popular.
ZACK GUZMAN: The other interesting thing to me too was, you know, we’re talking about states here in New Jersey. You called that last year. But when you look at some of these other states, it might be some that people didn’t see happening. You look at South Dakota. That’s a true red state, and you had the voters there voting to approve legalizing marijuana. So talk to me about the political landscape and what you see shaking out because the Senate– obviously even if Democrats don’t get control of the Senate, there’s still a lot of questions about Republicans maybe focusing on those issues you’re talking and the tax revenue they’re leaving on the table. What do you see happening in terms of federal legalization moving forward?
JOE LUSARDI: Well, I think– you know, listen, South Dakota was incredible. And that shows you a state went from no cannabis to both medical and adult use in one initiative. And I think that’s, you know, what’s to come in the future. We’re going to continue to get more progressive on cannabis.
And I think that eventually what we’ll probably get out of the federal government is at minimum the Safe Banking Act but more likely something like the States Act, and that will finally reconcile the conflict between federal and state law.
You know, we may not get a full federal legalization of cannabis for some time. Which, by the way, we think it’s a states’ rights issue anyways. We think the states need to make their own policies, and that’s absolutely an appropriate solution. But I suspect that with a split legislature, I think you’re going to get some compromise on cannabis next year, and you’re likely going to see some legislation to reconcile this issue.
ZACK GUZMAN: Yeah, the States Act there, one of those other ways to go about it and let states decide here. But it would help free up a lot of those questions at the federal level, and one of those looms large when it comes to legalizing at the federal level. You guys– a lot of cannabis investors probably know this, but other people who are looking at the sector might not. It’s that you guys are saddled with an extremely high effective tax rate here because you’re dealing with a Schedule I drug. On that front, section 280(e) is really what makes it expensive for you guys to operate. So on the question of profitability there, how does profitability look to change if you do get some of those things tweaked in reform? Because one of your competitors, Trulieve– I was talking with the CEO there– put the bill at about 16 million additional dollars that would be– you know, it would boost that benefit there in decreasing their tax costs if they do see section 280(e) change. Talk to me about that and how it would be a big boost to Curaleaf.
JOE LUSARDI: Yeah, I mean, look, 280(e) is completely unjust, and it’s for sure a multimillion -dollar drag on Curaleaf’s income statement as well. I think it’s important to say that if we get a fix on 280(e), it’s also rational to assume that maybe a federal excise tax will come in, and so it’s hard to really square what that will ultimately mean. But that would certainly be more efficient, and I think there’ll be a recognition that cannabis should be legal, and it’s probably appropriate to put an excise tax on it. So I think that’s how it will eventually play out.
ZACK GUZMAN: You’ve got earnings coming up here later in November. When you look ahead to the guidance investors should be looking for in terms of New Jersey coming on when that does get through here and becomes the 12th state to allow legal marijuana sales, how big of a boost are you forecasting that in here once it happens?
JOE LUSARDI: Well, you know, we have a call on November 17, and I can’t wait to update our investors on our progress and give people a look into the future. What I will say about New Jersey is that Curaleaf has the biggest market share. We’re more than 30%. We estimate New Jersey at full run rate is going to be a $2 billion market, so that should give you a sense of the numbers. And we’re well poised to continue to invest in the state and capitalize on the opportunity, and we really can’t wait to serve our population. I think it’s going to be a really exciting 24 months for Curaleaf in New Jersey and around the country.
ZACK GUZMAN: All right, the CEO of Curaleaf there. Exciting times in the cannabis space. Appreciate you coming on here. Joe Lusardi, everybody. Be well out there, Joe.