It’s not easy selling weed.
The legal marijuana business is booming — revenues are projected to hit $32 billion this year, more than double what sales were just three years ago. They’re projected to double again in the next six years, propelled by the launch of big new recreational weed markets in New York, New Jersey and Virginia.
But that hasn’t prevented most weed companies from continuing to hemorrhage red ink nearly a decade after Colorado and Washington became the first states to establish legal markets for anyone at least 21 years old. An analysis by POLITICO of financial filings from two dozen of the largest publicly traded U.S. operators shows that they collectively lost more than $550 million in the first six months of this year on revenues of nearly $4.5 billion.
“It all stems from federal illegality,” said Anita Famili, who heads the cannabis and CBD industry group at Manatt, a law firm and consultancy. “The cost of doing business for weed companies is just much higher than any other business.”
Arguably the biggest barrier to making money is the sky-high taxes weed companies pay because they’re treated like illegal narcotics traffickers under the federal tax code. The goods also cannot cross state lines, and that lack of interstate commerce means companies must build separate farms, factories and stores in each state where they do business and navigate a rapidly evolving patchwork of state regulations. Finally, raising capital is extremely expensive due to a dearth of financing options, an issue both Republicans and Democrats in Congress recognize but have yet to address. [Read more at Politico]
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