March 31 (Reuters) - New York’s legalization of recreational marijuana could generate $5 billion in sales for the first year and raises pressure on other states to follow the 16 that have now approved the plant for everyday use, the head of one of the country’s biggest producers said on Wednesday.
New York Governor Andrew Cuomo on Wednesday signed a bill paving the way for recreational sales of marijuana to begin in the state next year, pushing an ETF tracking U.S. pot producers’ stocks up more than 6% and on pace for its best day since the U.S. presidential election.
Ben Kovler, Chief Executive Officer of Green Thumb Industries Inc, the second largest U.S. pot producer by market value, said his company will allocate “significant dollars” to the New York market - set to be the second largest legal market after California.
New York could be worth more than $5 billion in just its first year of sales, without including “cannabis tourism” from other states, Kovler said in an interview.
“New York is New York, (there) couldn’t be a bigger deal,” Kovler said.
Global X Research analyst Pedro Palandrani estimated that based on Cuomo’s forecast of $350 million in cannabis tax revenue, the state’s sales should be $2.5 billion to $2.7 billion in the first year.
In comparison, Colorado crossed $2 billion in total cannabis sales last year after more than five years as a recreational market, according to figures published by the state’s revenue department.
While the COVID-19 pandemic and resulting lockdowns cut into tax dollars that states earned from sectors like hotels and airlines, the idea of legal cannabis sales offered some hope to plug up battered fiscal budgets across the country.
“What cannabis brings and is now proven is tax revenue of a material nature,” Kovler said, citing the example of Illinois, which in February collected more tax revenue from cannabis than alcohol.
Five states, including New Jersey, had legalized recreational marijuana by ballot initiatives during the November presidential election, and New York’s move now puts pressure on others like Connecticut, Palandrani said.
“(New York is) a quintessential emerging market, which is huge ... It will have an impact on the way the federal government thinks about legalization,” said Nicholas Vita, the Chief Executive Officer of New York-based Columbia Care Inc .
The effects of New York’s legalization will not just be limited to other governors and states, as the financial capital of the world, it also sets “a really good precedent from a federal point of view too,” said Charles Bachtell, Chief Executive Officer of Cresco Labs Inc.
Reporting by Shariq Khan in Bengaluru; Editing by Bernard Orr