Virginia’s Adult-Use Legalization May Open Up More Mid-Atlantic Markets

By J.J. McCoy, Senior Managing Editor, New Frontier Data

The Mid-Atlantic region is preparing to legalize cannabis. Virginia has passed legislation, two bills are pending consideration in Washington, D.C., and neighboring Maryland is debating its own adult-use bill, after the Old Line State already has medical marijuana dispensaries.

New Frontier Data estimates that annual sales of cannabis in existing legalized medical markets in Virginia and the District of Columbia (D.C.) are projected to reach a combined $119 million by 2025.

The timelines for operational adult-use markets in those jurisdictions remain uncertain, but legalization and sufficient market access for adult-use consumers could lead to an estimated $1.3 billion in legal sales within their mutual fourth year of operations.

In Virginia, the focus will be on cultivation. The state has notably required that cultivation is legal everywhere, with no jurisdictional or municipal bans allowed. The pro-rural stance serves to benefit the state, which already has strong and diverse agricultural production (including the nation’s third-largest tobacco production). Virginia lawmakers decriminalized recreational marijuana last year, making simple possession a civil penalty punishable by a fine not to exceed $25.

In D.C., tourism will play a major role in the shaping of a regulated adult-use market. Currently, that exists in a gray area that is lesser-known (and infrequently accessed) by tourists. An operational retail environment would bring legal cannabis to the District’s nearly 24 million annual visitors.

The U.S. Government Accountability Office (GAO) this month released a letter clarifying that while local D.C. lawmakers cannot legalize any Schedule I substance banned by Congress (which has powers of oversight over the District), federal law does not prevents city officials from making preliminary legislative steps while the congressional ban remains in effect. With Democrats having taken control of the House of Representatives, Senate and White House, advocates hope that the rider can be overturned, and adult-use cannabis sales legalized in the nation’s capital.

Virginia lawmakers last month approved a bill to legalize adult use, though sales will not begin until 2024. Still, the Old Dominion State is the first Southern state to pass legalized recreational marijuana, joining 15 other states and D.C. The legislation proceeds to Democratic Gov. Ralph Northam (D) for his signature.

Some Virginia lawmakers and advocates are already urging Northam to send down a legislative amendment to expedite legalization, which as written will not happen until 2024. Though Northam reportedly is considering shortening the timeline, such conversations are just beginning. Were Northam to propose amendments, legislators would approve or reject them during the assembly’s reconvened session on April 7, and permit sales as early as July.

Unlike the states of Colorado and Washington, which in 2012 became the first two states to legalize cannabis for adult use, Virginia law specifically says that licensed cultivation is legal everywhere in the state.

At least 39 of Colorado’s 64 counties ban cultivation, and in Washington, 134 of the state’s 281 local jurisdictions have some kind of ban on cannabis businesses. Most of those are aimed to block retail stores, but some ban cultivation, as well. While a social-equity provision giving preference to some applicants for licenses has drawn controversy as an effort make up for years of racial discrimination (Blacks in Virginia have been found to be 4x likelier to be charged with misdemeanor marijuana offenses than were Whites), another provision to extend a preference to applicants from economically distressed localities will benefit lots of (overwhelmingly White) applicants in rural Southside and Southwest Virginia.