Ohio residents voted in favor of a ballot measure to legalize the sale of cannabis for nonmedicinal use in November, as well as the cultivation of the crop. In garnering 57 percent support among voters, the success of the measure will make Ohio the 24th U.S. state to enable commerce involving recreational cannabis, defying a long-standing federal prohibition on the distribution of the drug.

A total of 38 states allow the distribution of cannabis for medicinal use. Ohio’s well-established medicinal market was on track to reach $520 million in sales by the end of 2023. With restrictions on recreational sales set to be removed, cannabis data firm BDSA estimates that annual sales in Ohio’s adult-use market could surge to $820 million by 2025. In 2027, that sum could swell to $1.65 billion.

A majority of Americans, representing 53 percent of the U.S. population, now live in a jurisdiction where anyone at least 21 years old can legally possess cannabis. The growing expanse of state cannabis markets coincides with continual increases in the share of U.S. residents who support deregulation of the drug. An October poll from Gallup shows a record 70 percent of 1,009 surveyed adults favor legalization, up from 68 percent in the prior round of polling. Gallup has conducted this survey since 1969 when the share of respondents supporting legalization was just 12 percent. In the most recent results, there was a majority of support for cannabis legalization among respondents from both major political parties, as well as independents.

Separate survey data from ATB Capital Markets shows that investors have also warmed up to cannabis recently. Roughly 61 percent of 23 institutional investors surveyed by ATB expect U.S. multistate operators (MSO) in the cannabis space will beat the S&P 500 over the next year. Though most of the respondents “reported no change or decreased exposure to MSOs over the past six months,” they estimated a 75 percent chance the U.S. government will adjust marijuana’s designation as a Schedule I narcotic to a lower priority Schedule III classification, within the next 18 months.

Lack of access to basic financial services has become particularly dire for dispensaries and other cannabis-focused places of business. Most banks in the United States are federally chartered and, therefore, have to do their business according to federal laws and regulations — particularly those regarding narcotics. Some state-chartered banks are more open to doing business with cannabis companies, but lack of access to financial infrastructure in the banking system has created a very cash-intensive industry, opening businesses up to a wave of robberies targeting dispensaries and other places that cannabis businesses might be stashing money they can’t get into a bank. Those vulnerabilities raise the cost of doing business by forcing firms to hire extra security, pay for greater insurance, etc.

Bipartisan support for cannabis banking reform in the United States has been gaining significant steam, as Sen. Susan Collins (R-Maine) added her name as a co-sponsor to the Secure and Fair Enforcement (SAFE) Banking Act. The SAFE Banking Act, which would allow banks to legally handle the proceeds from a state-legal cannabis business by prohibiting certain federal banking regulators from taking adverse actions against banks and credit unions that provide services to “cannabis-related legitimate businesses,” has been around for several years and has passed the House of Representatives seven times, only to be stonewalled by the Senate. It seemed that hurdle was about to be overcome, but a looming government shutdown, as well as the removal of a Speaker of the House, halted progress on most nonbudget-related items of legislation. This is still largely the state of affairs in the U.S. Congress.

With potential relief from Congress once again falling by the wayside, U.S. cannabis enterprises may soon turn to litigation to speed legal reform that is desperately needed in the industry.

This article was excerpted from a report written by McAlinden Research Partners, which can be accessed here.