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17 Predictions For Marijuana Markets In 2017 From The Experts - Part 2

January 11, 2017 8:42 am
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2016 was one of the best years for legal marijuana in recent history. Marijuana legalization initiatives won very decisively in eight out of nine states on Election Day, as a record number of adults in the U.S. supported the legal use of marijuana. In addition, the industry hit several milestones, including cannabis sales of more than $1 billion in the state of Colorado, investments of over $1 billion and the IPO of the first medical marijuana properties-focused REIT Innovative Industrial Properties Inc (NYSE: IIPR) in the New York Stock Exchange.

Although some people are worried about how a Republican-controlled White House and Congress, along with the appointment of Jeff Sessions as attorney general, could impact the cannabis industry, experts seem to agree that there will be no big changes in terms of policy and states’ independence.

However, there’s more to the cannabis industry than policy. So, Benzinga decided to reach out to the top experts in the space, and asked them to share their predictions for 2017. Check out Part 1 of this article following this link.

7. Cannabis Is No Longer A Bad Word

Brendan Hill, famed drummer of Blues Traveler, a Grammy-winning U.S. band, and co-owner of Bainbridge Island’s Paper & Leaf, one of Washington State’s top grossing legal cannabis retail shops, predicted that “in 2017, we’re going to see the nationwide approval of cannabis continue to increase as a direct effect of the public’s knowledge of cannabis continuing to expand. Cannabis had an extremely strong and bipartisan showing during the 2016 election, and with a greater percentage of Americans living in a state with some form of legal cannabis than ever before, it’s never been more openly discussed and regarded as a viable business venture.”

“As studies continue to come out, which indicate an increase in use among older demographics and baby boomers for help with body aches and pains, and younger generations being more encouraged to see cannabis on a similar plain with beer and wine, positive attention from media and politicians will help the overall understanding of cannabis and its multiple benefits to continue growing,” he supplemented.

8. Intellectual Property Battles Arise

Scott Greiper, Michael Swartz and Harrison Phillips of Viridian Capital Advisors predicted the rise of intellectual property battles: “Due to the federal illegality of the cannabis plant,cannabis companies have not been able to utilize traditional intellectual property protection methods such as trademarks and patents through the USPTO. As such, many firms have been stealing and rebranding intellectual property and trade secrets as this is how business was conducted in the black market. Furthermore, these firms have little in the way of legal recourse due to cannabis’ federal illegality and the lack of standard IP protection measures. Cannabis firms have already been utilizing blockchain to stake claims to their IP (even though this does not provide full protection under law), and we anticipate these intellectual property battles to accelerate as the industry matures and competition between companies that have gained an initial foothold picks up.”

9. Major Banks Play It Safe

CanPay CEO Dustin Eide, who recently wrote an article for Benzinga, argued that “rather than actively — or even passively — participating in the cannabis industry, the large banks and financial services companies will use the greater business transparency that comes when states create their legal markets to discover (and close) unapproved cannabis business accounts.”

10. Smaller Players Provide Increased Access To Transparent Banking

In this line, Viridian experts predicted “the introduction of legislation for increased banking access to the cannabis industry.”

Dustin Eide added, “[2017 will be] The Year of the Credit Union and Community Bank in Cannabis.”

“In contrast to this increased scrutiny from the major institutions, credit unions and community banks will fill the banking gap in 2017 in each of the newly legalized recreational markets and several of the new medical markets through compliant and transparent cannabis banking programs.”

Nonetheless, he continued, “Banks require legitimacy. [So], financial institutions operating compliant banking programs for the cannabis industry will begin requiring their clients to utilize financial services strictly approved for the cannabis industry. The era of hidden merchant accounts, operating through intermediaries or doing business under any other name than the business' DBA name will come to end as these institutions (and their federal regulators) push for complete transparency and legitimacy.”

Luba Kay, chief financial officer at CannaSOS Corp, a social media site for “everything in the marijuana industry,” seemed to agree: “According to the FDIC National Survey of Unbanked, around 70 percent of marijuana-related businesses in North America do not have a bank account. Most transactions are done with cash. Because they do not have bank accounts, they are unable to pay suppliers, they have a huge risk of getting robbed as they carry a large amount of cash to pay their partners and of course purchasing off the web. To partially solve this problem, CannaSOS created a Perkscoin Reward Point module, which would not only allow you to accumulate reward points, but will also allow you to pay for a certain product online using Perkscoin.”

“In 2017, I see banks put less pressure on marijuana-related businesses, and I see the percentage of marijuana-related businesses who do not have a bank account to drop from 70 percent to 55 percent,” Kay concluded.

11. The Land Rush Continues

Ryan R. George, CEO of 420 Property, forecasts a continuation of the land rush: “2017 is going to be a major growth year in cannabis real estate. The land rush began mid 2016 as those in the industry and property investors started to acquire land and facilities suitable for cannabis cultivation in anticipation of new Cannabis Reforms being passed in the 2016 Elections. That land rush went from warm to blazing after the election and new cannabis laws were passed. Cannabis is now being recognized as a viable business opportunity and everyone, from the stoner on the street corner puffing a ‘j’ to your sophisticated ‘suits’ on Wall Street, wants a piece of the action.”

“Those with the means and the forethought are tackling the biggest problem even the most talented cannabis operators face: real estate. As I mentioned in our previous conversation, there is simply not enough compliant or suitable cannabis facilities to meet the current demand,” he continued.

“From what I have seen, investors are more willing than ever to get involved in cannabis — like a child with a new toy; this has helped ease some of the financing difficulties our clients have faced at 420 Property Financing. However, easier terms for financing are also fueling a price war and I expect to see cannabis properties appreciate another 20 [percent] to 30 percent, and leases on cannabis space to rise another 10 [percent] to 15 percent in 2017. There is bittersweet real estate hope for cannabis operators, but it's not exactly what they will want to hear and it's not coming for another five to seven years,” George went on.

“Prices on cannabis leases and properties will correct, but this will only come after the amount of competition in the industry forces diminishing profit margins on operators as the wholesale value of cannabis drops. Then we will see a correction in the cannabis real estate bubble. But as profit margins remain high, expect high valuations and rents,” the expert ended.

Find out the other 6 predictions these and other experts shared — and the size of the market — in Part 3 of this article!