Marijuana could present ample opportunities for Ohio entrepreneurs, but challenges remain
During an Akron Roundtable discussion Thursday, attorney Stephen Lenn shared a story he heard about a cash transaction involving the Arizona marijuana industry, when a government official sought to get the “stinking cash” out of his lobby.
Lenn said the official used the phrase not because it was a lot of money—which it was—but because marijuana businesses often keep their cash in the same vaults as their product.
“So, bills smell,” joked Lenn, a managing partner at Akron-based national law firm Brennan Manna Diamond.
While Lenn joked, the necessity to deal with cash is a serious issue for the marijuana industry because the plant still isn’t legal under federal law. This has resulted in an absence of U.S. regulations addressing if and how banks can work with marijuana clients, Lenn told the audience on a more serious note during his discussion, “Out of the Shadows—Cannabis Going Mainstream.”
Since Ohio voters passed Issue 2 to legalize adult-use, or recreational, marijuana Nov. 7, many questions remain about how legalization will be implemented. State lawmakers plan to make changes to the law before it goes into effect Dec. 7.
More: Ohio Senate wants to change marijuana law before it takes effect Dec. 7
In his talk, Lenn primarily focused on potential business opportunities for people seeking to invest or operate in Ohio’s marijuana market.
“Why should you be interested?” he asked the Roundtable’s lunch crowd. “Because this is a once-in-a-lifetime opportunity for entrepreneurs and professionals to be involved in the creation of an entirely new industry from scratch.”
Lenn pointed out that in 2023, eight states had more than $1 billion worth of marijuana sales. The state with the most sales, California, sold about $4.9 billion, followed by Midwest markets. Michigan sold around $2.9 billion, and Illinois roughly $1.9 billion.
“In Ohio, the projections are that the first full year of legalized adult use, it would generate $1.5 billion to $2.5 billion in revenues,” Lenn said. “And by the fifth full year, it could be as much as $5 billion.”
Meanwhile, Lenn said the first and fifth years of Ohio adult-use marijuana could yield tax revenues of up to $220 million and $400 million, respectively.
“In addition to the tax revenues, you're looking at a pretty significant employment issue,” Lenn said.
About 7,000 people are currently employed in Ohio’s medical marijuana market, Lenn said, adding that the number could jump to 25,000-30,000 now that adult use is legalized.
“And this is not a red-state, blue-state issue because medical marijuana is legal in Oklahoma, legal in a number of southern states, a number of western states," Lenn said. "So, it's really been a nationwide trend.”
However, hurdles remain for current and potential marijuana businesses that various U.S. lawmakers and executive agencies are working to address. In August, for example, the U.S. Department of Health and Human Services recommended to the U.S. Drug Enforcement Administration that marijuana be rescheduled from its current Schedule I drug status — defined as drugs with no currently accepted medical use and a high potential for abuse — to Schedule III.
And in September, the Senate Banking Committee passed the SAFER Banking Act, which would expand the marijuana industry’s ability to work with banks.
In 2013, then-U.S. Deputy Attorney General James Cole issued a memorandum recommending law enforcement take a mostly hands-off approach to state-legal, adult-use marijuana businesses when they comply with state and local laws and regulations, Lenn said.
Within these siloed, legal adult-use states, of which Ohio became the 24th this November, prices of marijuana have fluctuated, he said, leading to some operators having challenges staying afloat.
“If you’re looking at investing in a cannabis company, you need to look at operations because it is the low-cost operators — the efficient operators — who are able to withstand those fluctuations,” Lenn said.
He predicted that in the future, more tobacco, alcohol and consumer products companies will enter the market. Beverage company Constellation Brands and tobacco company Altria have already joined, he said.
“As the money gets bigger, it's like catnip to businesses, investors and so on that want to get into the industry,” he said. “And everyone that does paves the way for the next one.”
This article originally appeared on Akron Beacon Journal: Local attorney speaks on hurdles, opportunities in new cannabis industry
