The green rush

BMG 320 STEVEN KARPENKO
TheGreenRushFuture Emerging Market of Recreational
Marijuana in the American State of New York
Sarah Gojecki
13/04/2015
Abstract: This paper is a research on the future emerging market of recreational marijuana in the
American State of New York. It examines the influence of legal transitions and the market
opportunities for entrepreneurial firms in the recreational marijuana market in the American state of
New York. In responding to the calls for more research on the emerging recreational marijuana
market, this paper is an attempt extending the linkages between the consumer behavior and the
legal environment to study the future recreational marijuana market in the United States of America
with a focus on New York State. Considering New York’s global reach and financial stability,
legalization would be a chance for New York recreational marijuana businesses to lead the market.

T H E G R E E N R U S H | 2
Contents
Introduction......................................................................................................................................... 3
The City that Never Sleeps .................................................................................................................. 3
Social Overview ................................................................................................................................... 4
Consumption Comparison to Alcohol ............................................................................................. 4
Society’s support............................................................................................................................. 4
Recreational Consumption.............................................................................................................. 5
Health Consequences...................................................................................................................... 5
Social Surplus................................................................................................................................... 6
Legal Overview .................................................................................................................................... 7
Current Industry Information.............................................................................................................. 9
Demand and Supply ...................................................................................................................... 10
Competitive Landscape ................................................................................................................. 10
Products Available......................................................................................................................... 11
Government’s Adaptation............................................................................................................. 12
Investment Opportunities................................................................................................................. 12
High Profits.................................................................................................................................... 12
Industrial Hemp............................................................................................................................. 14
Risk ................................................................................................................................................ 15
Prediction for the Future Market...................................................................................................... 15
Predictive National Growth........................................................................................................... 15
Federal Legalization....................................................................................................................... 17
Entrance of the ‘Giants’ in the Market.......................................................................................... 18
New York ....................................................................................................................................... 19
Conclusion ......................................................................................................................................... 20
Exhibit................................................................................................................................................ 21
Bibliography....................................................................................................................................... 25

Introduction
Marijuana is the third most popular recreational drug in America (behind alcohol and
tobacco), and has been used by nearly 100 million Americans (About Marijuana, 2015). The
booming dispensary is part of the US legal marijuana industry, now undergoing a vertiginous
spike that is being called the “green rush” (Bennett, 2014). Today, legalization seems like
inevitable; at the time of this writing, ten states are considering some form of legislation to
allow marijuana to be sold over the counter, and at least a dozen others are considering
decriminalization or medical-marijuana measures. This paper is a reflection on the article in
the Huffington Post which declared in September 2014 “New York Could Legalize
Recreational Marijuana In 2015” (Ferner, 2014). This paper will include a legal overview, a
social outlook of recreational marijuana consumption, specific characteristics of the
recreational marijuana market and potential impact of New York State’s eventual
legalization.
The City that Never Sleeps
New York City exerts a significant impact upon global commerce, finance, media, art,
fashion, technology, entertainment. As many as 800 languages are spoken in New York,
making it the most linguistically diverse city in the world (New York, NY, 2015). Moreover,
New York City, ahead of London, is the financial capital of the world (McSherry, 2014). With
an estimated population of 19,651,127 people in the New York State in 2013 (New York,
2015) and a rapid increase of 2.9% in private sector jobs since February 2014, New York is
known for its business spirit. Hong and Bisogno (2007) describe the unique business culture:
Its friendly business stance has kept the spirit of innovation alive and attracted an
extensive pool of international talent. Managers and employees in the city thrive on a
bottom-line mentality, making deals as quickly and profitably as possible.

The legalization of recreational marijuana would have a major impact on the state of New
York. The specific entrepreneurial characteristics of the state are the key to a successful and
rapid growth of New York’s potential legal recreational marijuana market. Considering the
high business spirit of the state, the direct access to capital and its important innovative
drive, New York should set itself apart when it comes to winning the legal recreational
marijuana market.
Social Overview
As marijuana and alcoholic beverages both contain intoxicating properties that are
similar in the minds of many consumers, they tend to serve the same want, and it is
reasonable to suppose that they are substitutes (Clements et al., 2010). In order to have a
better understanding of the recreational marijuana market, it is substantial to know what
the customer is looking for when purchasing such a good.
Consumption Comparison to Alcohol
President Barack Obama once stated in an interview with The New Yorker that he
does not believe marijuana to be any more dangerous than alcohol (Remnick, 2014):
As has been well documented, I smoked pot as a kid, and I view it as a bad habit and
a vice, not very different from the cigarettes that I smoked as a young person up
through a big chunk of my adult life. I don’t think it is more dangerous than alcohol.
Some may even say that legalization is providing a less harmful alternative to alcohol
(Effective Arguments, 2014).
Society’s support
An important shift is currently happening concerning the way society views marijuana
consumption. From 2003 to 2006, the percentage of people thinking marijuana consumption
is morally wrong decreased from 50% to almost 30% (see exhibit I). Additionally, over the

last ten years, the percentage of people saying marijuana should be legalized increased
constantly (see exhibit II).
Recreational Consumption
THC, or tetrahydrocannabinol, is the chemical responsible for most of marijuana's
psychological effects (Bradford, 2015). According to the National Institute on Drug Abuse
(NIDA), THC stimulates cells in the brain to release dopamine, creating euphoria. There are
multiple ways people consume marijuana (DrugFacts: Marijuana, 2015):
People smoke marijuana in hand-rolled cigarettes (joints) or in pipes or water pipes
(bongs). They also smoke it in blunts—emptied cigars that have been partly or
completely refilled with marijuana. To avoid inhaling smoke, more people are using
vaporizers. These devices pull the active ingredients (including THC) from the
marijuana and collect their vapor in a storage unit. A person then inhales the vapor,
not the smoke. Users can mix marijuana in food (edibles), such as brownies, cookies,
or candy, or brew it as a tea.
Marijuana is often consumed in social groups where the substance is shared. Recreational
marijuana users typically smoke to obtain a "high" which affects the part of the brain that
influences pleasure, memory, thinking, concentration, sensory and time perception, and
coordinated movement (Products & Markets, 2015). One may say it is a substitute to
alcohol, however, only a study on fully legalized recreational marijuana in the long-run will
be able to provide the answer whether it is a substitute or a complement for the American
market.
Health Consequences
Both alcohol and marijuana consumption can have an impact your body, showing
both short- and long-term health effects; though alcohol has been linked to some 88,000

deaths per year, according to the CDC (United States Centers for Disease Control and
Prevention), while those associated with marijuana are hard to estimate due to the absence
of direct deaths (Brownstein, 2014).
In the short-term, alcohol and marijuana involve different dangers. On one hand, drinking
too much alcohol can be deadly. The inability to metabolize alcohol as quickly as it is
consumed can lead to a buildup of alcohol in the brain that shuts down areas necessary for
survival, such as those involved with heartbeat and respiration (Brownstein, 2014). On the
other hand, there is no such thing as “dying of overdose” when consuming marijuana.
However, because marijuana can impair coordination and balance, there is the risk of
hurting oneself, particularly if driving (Brownstein, 2014).
In the long-term excessive alcohol use over the long-run can lead to the development of
chronic diseases and other serious problems such as heart disease, cancer, liver disease and
alcohol dependence (Facts Sheets …, 2014). Consuming marijuana on a regular basis also
has negative health impacts in the long-run. When marijuana users begin using as teenagers,
the drug may reduce thinking, memory, and learning functions and affect how the brain
builds connections between the areas necessary for these functions (DrugFacts: Marijuana,
2015).
Considering the health consequences of marijuana compared to the ones of alcohol,
marijuana might be the preferred substance the long-run which would transfer a part of the
value of the alcohol industry to the recreational marijuana industry.
Social Surplus
Marijuana prohibition has been just as ineffective, inefficient, and problematic as
alcohol prohibition (Effective Arguments …, 2014). "We want to be transparent, legit and
recognized as an industry that pays millions of dollars in taxes a year," says Gehring, a

partner in four Denver-area dispensaries in Altman’s (2014) article. Moreover, Troy Dayton,
co-founder and chief executive of cannabis investment company the ArcView Group
declared in Management Today (Bennett, 2014):
The current feeling is a bit like the dotcom or the green-tech booms […] only it also
brings freedom and saves money in criminalization. This industry is going to make the
world a safer place. It'll also create a lot of work in post-recession America.
Enforcing marijuana prohibition costs taxpayers an estimated $10 billion annually and
results in the arrest of more than 693,000 individuals per year where approximately 88
percent were charged with possession only (About Marijuana, 2015). Advocates promote
marijuana as the medicine states need to fill their coffers, create new jobs, and cut costs by
keeping nonviolent drug offenders out of jail (Effective Arguments …, 2014). By regulating
marijuana, authorities will have detailed data on the industry: who is selling, where it is
being sold, and when. Sales will benefit legitimate, taxpaying businesses instead of violent
drug cartels, and states and localities will generate significant new tax revenue (Effective
Arguments …, 2014). The industry tax revenues are redistributed by the state to fund
different institutions such as public schools (see exhibit III). Basic economic theory may be
applied to the situation. In Clement et al.’s research (2010) a demand curve is derived (see
exhibit IV) showing the impact of the taxes imposed on marijuana which creates a
deadweight loss. Deadweight losses do not allow businesses to achieve an optimum profit,
representing a loss. However, the transparent transactions from taxes on marijuana increase
the image of the industry and will most likely yield in a higher demand.
Legal Overview
There are currently four states and the District of Columbia in the United States that
have passed the law allowing for the personal possession and consumption of marijuana by

adults over 21, referred as “legalization” (see exhibit V). This legal change allows a legal
controlled market for marijuana in which consumers can buy marijuana for personal use
from a safe legal source (Legalization, 2014). At least 10 more states are considering
legalizing marijuana by 2016. By 2020, there could be as many as 18 states where
recreational marijuana is legal (Ferner, 2015).
Medicinal marijuana legalization adopted in multiple states and allows individuals in
possession of a medical prescription to buy marijuana from regulated shops specific to
medicinal marijuana. Decriminalization of marijuana does not mean that people can use
drugs with impunity. Instead it means that possessing small amounts no longer lands the
perpetrator with a criminal record or a jail sentence (T.W., 2014). Legalization is the removal
of all penalties for the private possession up to a certain amount and responsible use of
marijuana by adults, including cultivation of a limited number of cannabis plant for personal
use, and casual nonprofit transfers of small amounts (About Marijuana, 2015). More
importantly, it means that the supply side of the business—cultivation, transportation and
retailing—is also legal (T.W., 2014). However, consuming marijuana or being under the
influence of marijuana in public remains illegal in every state in the U.S.
Colorado was the first state that legalized recreational marijuana in 2005. This
legalization allows the citizens over 21 years of age to legally possess up to one ounce of
marijuana. Colorado had made $53 million revenue in taxes on the sales of recreational
marijuana in 2014 and expects to collect up to $70 million by June 2015 (Lobosco, 2015).
Washington was the second state to legalize recreational marijuana in 2012 (Springer, 2014)
and uses the same possession limit as Washington.

Alaska legalized marijuana use on February 24th
2015 (Botelho, 2015). However, the state
law does not permit a legal market for marijuana production and sales yet (Alaska
Legalization, 2015).
As of February 26th
2015, recreational marijuana is legal in Washington D.C. Marijuana sales
remain illegal for now, but the District Council is considering a bill that would regulate and
tax marijuana sales, similar to laws in Colorado and Washington State (Ferner, 2015). D.C.
continues to prohibit marijuana possession on federal land, which includes roughly 20
percent of the District.
In Oregon, starting July 1st
2015, recreational marijuana will be legalized and once the state’s
retail industry will be established in the first half of 2016, anyone 21 and older will be able to
go into stores that stock clones and buy one (Crombie, 2014).
New York State decriminalized marijuana possession in quantities of 25 grams or less in
December 2014 (New York Laws …, 2014). Although the legalization is not complete, there
are high possibilities of legalization in 2015 (Raghavan, 2014). The experience of Colorado
and Washington States will be used in deriving the prediction as legalization has been
adopted earlier and local markets are more mature.
Current Industry Information
Three states have the current legal status to have a supply side of the business:
cultivation, transportation and retailing. Although the market is recent, multiple
characteristics of the market have already been set.
The industry is currently in the quality growth of its life cycle (see exhibit VI). IBIS
World provides some reasons for the current life cycle position of the industry: it is growing
at a faster rate than the US economy, the customer acceptance of industry products is
increasing, the number of industry establishments is expanding robustly, numerous new

companies enter the market and the demand is increasing (Industry Outlook, 2015). The
legalization of recreational marijuana cultivation contributed to the boom during the 2014
year, as revenue rose an astounding 54.7% (Industry Performance, 2015).
Demand and Supply
The demand determinants are the government regulation and the disposable income
(Products & Markets, 2015). Recreational Marijuana growing industry has been significantly
restricted by an increasing amount of attempts to impose additional regulations on the
industry (Industry Performance, 2015). While the level of regulation is expected to remain
flat in 2015, it still poses a potential threat to the industry (Industry Performance, 2015).
The level of household income determines consumers' ability to purchase marijuana
products and the expected increase of per capita disposable income over 2015 presents an
opportunity for the industry (Industry Performance, 2015).
In order to meet the growing consumer demand for recreational marijuana, both
Colorado and Washington have issued licenses for the cultivation of recreational marijuana
(Industry Performance, 2015). However the limited number of licenses distributed resulting
in a supply shortage (Industry Performance, 2015).
Competitive Landscape
Due to the high price of licenses and the number of applicants, the competition for
operators to obtain the required licensure from appropriate agencies in each state is high
(Competitive Landscape, 2015). Weinberg (2013) expresses his predictions:
The competitive landscape is rapidly evolving and there is no doubt margins will be
compressed. As larger players enter the business and consolidation continues, the
price points will continue to decline.

In fact, due to the number of businesses trying to enter the market, and, the limit of plants
each individual is allowed to grow (each business must grow 70% of its marijuana), the
barriers to entry in the industry and the competition increase.
Products Available
Marijuana derived products are overwhelmingly popular in the market. The industry
faces a high demand in edible goods, IBIS World writes in its industry report that changing
attitudes and rising incomes spur new products (Industry Performance, 2015):
The development of edible cannabis products (edibles) have also spurred greater
consumer acceptance of recreational marijuana, generating demand for marijuana
cultivation. Edibles can take the form of food, extracts and oils, and range from
marijuana-infused mints and candies to baked goods and beverages, among many
other products. Edibles provide a more convenient and familiar product to
consumers, thereby stimulating consumer demand for marijuana products
For example, Dixie Elixirs & Edibles targets users who are worried about the health effects of
smoking. Dixie uses an array of “innovative delivery systems” for THC that range from its
flagship carbonated beverages to mints, fudge bars, capsules, chocolate truffles and oil
cartridges for vaporizer pens (Reuteman, 2014).
A potential niche rises in one of the biggest sources of concern with legal marijuana: testing.
Drug tests are not like alcohol tests. Alcohol tests report blood alcohol at the moment —
current impairment. Drug tests sense usage within an undetermined amount of time in the
past. A person could have smoked on the weekend and still test positive days or weeks later
(Fey, 2014). Researches may be able to provide a product for a better alternative for testing
marijuana consumption.

The unlimited possibilities allow entrepreneurs to be creative when introducing a
new product. Leveraging a mix of traditional and out-of-the-box initiatives to reach
consumers, companies are amplifying efforts to rebrand the drug and debunk negative
stigmas (Stein, 2014). In January 2013 the ArcView Angel Investor Network held a meeting
where entrepreneurs seeking donations or investments would have seven minutes to
introduce their prototype (Parloff, 2013). Dayton believes the joint will soon become
obsolete, with vaporizers and edibles taking over (Stein, 2014).
Government’s Adaptation
Legalized marijuana consumption is heavily taxed. Local states have to adapt in order
to regulate the new tax income. For example, the Oregon Liquor Control Commission signed
an agreement with a Kansas-based company to build an online application process for
recreational marijuana business licenses. The system will be used to apply for new licenses
or to renew existing ones, pay license fees by credit card and pay marijuana taxes. It will also
be used to update license information (Crombie, 2015), and make the regulation and tax
collection more efficient. The agency's agreement with the company has an annual
subscription fee of $80,000 and no up-front costs (Crombie, 2015). The state must begin
accepting applications by January 2016 (Crombie, 2015). More changes are to be expected in
order for the government to make the transactions as transparent as possible.
Investment Opportunities
The US's legal marijuana industry is creating an excitement among investors and
start-ups not seen since the first dotcom boom (Bennett, 2014).
High Profits
“I never thought I’d see more people invest in marijuana than smoke it” writes
Fidelman (2015). The growth in this industry is tremendous, marijuana as an industry grew

by roughly 70% last year (Kane, 2015). A 2006 analysis of government eradication efforts
over the prior three years found that marijuana would have been one of the largest cash
crops in the United States if it had been legal under federal law, and was already "the top
cash crop in twelve states, one of the top three cash crops in 30 states, and one of the top
five cash crops in 39 states" (Schneider, 2014).
According to Douglas Leighton, founder of Boston-based Dutchess Capital, an
institutional investment company that invests in several areas of the legalized cannabis
sector, the illegal marijuana market is valued at $50 billion, while the legal, investable
market is valued at nearly $3 billion (Kane, 2015). Considering the tremendous value of the
illegal market, the minimum of 10 states planning on passing legalization in the near future
will permit an important transfer in value from the illegal to the legal market. Leighton
predicted in an article for Money Management Letter (Kane, 2015):
The gap between the two markets is narrowing, and as long as states continue to
come online and in some way legalize or decriminalize marijuana, then the [legal]
market will continue to grow.
Predictions are formal: the value of the industry will drastically increase over the next ten
years.
Institutional investors are growing increasingly interested in marijuana as an
investment. The legalization of marijuana in some states, combined with some recent high-
profile investments, has some investors considering marijuana as a source of long-term
investment returns in an agriculture or venture capital bucket: two asset classes that have lit
up investor interest over the past year (Kane, 2015). Marijuana investments would work
similarly to agriculture or venture capital investments within a portfolio, but with a higher
degree of risk (Kane, 2015).

On the positive side, marijuana is already a profitable industry with an existing
consumer market, and it could fit into an institutional investor's portfolio as a long-term
investment, according to Cohen, CEO of MJardin (cultivation and business management
services for marijuana industry) (Kane, 2015).
Industrial Hemp
The marijuana that people consume contains adequate levels of the chemical THC to
cause a "high" and comes from the female buds of the plant cannabis sativa. The rest of the
plant, called hemp, is composed of the non-intoxicating parts of the cannabis plant
(Schneider, 2014). Different sectors of investment may be thought of when it comes to
federal legalization as cannabis as a whole is currently illegal. Although it grows wild across
much of America and presents no public health or safety threat, hemp is nevertheless
routinely uprooted and destroyed by law enforcement agencies. Each year, approximately
98% of all the marijuana eliminated by the DEA's Domestic Cannabis
Eradication/Suppression Program is actually hemp (Statement on the Cultivation of
Industrial Hemp, 2015). Not all of the money from cultivating cannabis is will come from
selling marijuana to consumers as a drug. Hemp has a variety of applications that may
interest small and big businesses alike. It is a tall, slender, fibrous plant similar to flax or
kenaf. Hemp produces a much higher yield per acre than do common substitutes such as
cotton and requires few pesticides (Introduction, 2015). Moreover, various parts of the plant
can be utilized in the making of textiles, paper, paints, clothing, plastics, cosmetics,
foodstuffs, insulation, animal feed and other products (About Marijuana, 2015). A number of
U.S. states have commissioned studies recommending hemp as a viable economic crop.
Most recently, legislatures in Montana and North Dakota have enacted legislation licensing
farmers to grow hemp (though federal approval still remains necessary), hopefully paving

the way for a renewed U.S. hemp cultivation industry in the not-so-distant future (Statement
on the Cultivation of Industrial Hemp, 2015).
Risk
Although the rise of an entire market may seem like the perfect opportunity for
investment, some are skeptical when measuring the risks of such an investment. An article in
Kiplinger's Personal Finance states (Kristof, 2014): “Although the industry itself is expected to
grow like a weed, the vast majority of companies operating in it are unprofitable, and most
have terrible balance sheets.”
Moreover, the uncertainty factor due to the newness of the industry represents a
high risk. “But this has never been done before. There is no Marijuana Business for Dummies
book” declared Tripp Keber, owner of Dixie Elixirs & Edibles, manufacturing more than 100
cannabis-infused products for Colorado’s adult retail marijuana market (Remnick, 2014).
Prediction for the Future Market
Prohibitionists have long held that marijuana legalization would cause the rates of
recreational use to skyrocket (Schneider, 2014). Rising demand is also forecast to widen
profit margins, as is the success of the for-profit recreational marijuana business in Colorado
and Washington (Industry at a Glance, 2015). The state of New York appears to be on track
to approve legislation. If successful, the legislation could make New York the nation’s biggest
cannabis market for recreational use (Neutra, 2014).
Predictive National Growth
U.S. retail cannabis sales are estimated to rise more than five-fold over the next five
years, from an estimated $2.2-$2.6 billion in 2014 to $7.4-8.2 billion in 2018 (see exhibit VII),
according to new financial data released in the 2014 edition of the Marijuana Business
Factbook (Holland, 2014). What economic impact will the widespread legalization of

marijuana have? Multiple factors are to be considered. Law student and writer Dan
Schneider (2014) questions the different variables to take into account in one of his articles
for Dollars & Sense:
How many people will be consuming marijuana, and how much? What states stand
to benefit most from growing it? Will big business take over its production and sale,
or will it remain in the hands of independent growers and dealers? And how large, in
dollar terms, might this whole sector end up?
Mallon (2015) provides additional forecasts:
The projections are interesting – the legal marijuana industry is currently about a
$2.4 billion industry, but it is expected to be a $21 billion industry by 2020 if 12 states
legalize recreational use and up to a $35 billion industry if all 50 states legalize
recreational use by 2020.
A crucial lesson is to use markets - the freer the better - as much as possible. Markets are
more than a way to tabulate profit and loss (Gillespie, 2014). As the Nobel prize-winning
economist Friedrich Hayek said, “markets and prices are actually information systems that
are constantly signaling how much given goods, services, and opportunities cost relative to
other goods, services, and opportunities” (as cited in Gillespie, 2014). They allow people all
over the world to coordinate supply and demand (Gillespie, 2014). But how will the supply
and demand evolve over time for the recreational marijuana market?
In researching the efficacy of Colorado's new cannabis tax, economists at Colorado State
University believed that, with legalization, there would be a balancing convergence of those
"inclined to consume larger quantities because it is now legal" and "those who lose interest
in marijuana now that the 'forbidden fruit' aspect" is removed (Schneider, 2014). An
additional variable to take into account is the shift in acceptance of marijuana consumption

causing a strong demand growth. In five years, the number of operators is anticipated to
increase at an average of 17.7% per year to 100,742 while the number of employees active
in the cultivation of marijuana is also expected to increase an average of 19.6% per year to
405,498 individuals (Industry Performance, 2015). Currently, the lack of access to banking is
an important threat for the growth of the legal marijuana industry; however, the rising
demand is also forecast to widen profit margins, as in the success of the for-profit
recreational marijuana business in Colorado and Washington (Industry at a Glance, 2015).
Federal Legalization
Even though marijuana is still illegal at the federal level, President Barack Obama said
very clearly that his administration will not seek to enforce federal law in states that have
deemed the green plant legal (Wells, 2014).
Colas says the industry won’t truly take off until the federal government makes
marijuana legal (Williams, 2015). Alex Altman (2014), a Time journalist, expresses his
prediction for the future of the recreational marijuana market:
It seems inevitable that some problems will materialize. Supporters of Colorado's
marijuana industry fret about heavy taxes and high prices, the potential of dwindling
supply, overregulation, and the specter of intervention from the federal government.
A car accident involving a stoned driver, use by minors or pot tourists carrying their
product across state lines could all tarnish the rollout. Then there is the biggest
concern: a lack of access to banking services that has forced legal pot businesses to
operate mostly in cash, both a legal and safety hazard.
Cannabis businesses have been financially hamstrung as well. Opening a bank account is
difficult because local banks must obey regulations laid down at the federal level, at which
cannabis is still outlawed (The Marlboro …, 2014). Moreover, the federal ban provides

additional difficulties to do business in more than one state and limits product transport
across state lines. Corporations have to build factories in each state where it does business
(The Marlboro …, 2014). Due to the limited number of targeted consumers and the transport
limit, the ban makes investment in cannabis diversification unappealing to existing big
corporations and prevents new businesses from expanding. While federal law currently
limits the expansion of the industry to a state, it also acts like an infant industry protection
allowing businesses to learn by doing before a potential international competition. Federal
legalization would change the entire industry.
Entrance of the ‘Giants’ in the Market
The legal cannabis industry is run by small and medium businesses. As liberalization
spreads, that may not last (The Marlboro …, 2014). Until recently Colorado’s dispensaries
were obliged to grow at least 70% of the cannabis they sold, and cultivators had to retail at
least 70% of what they grew (The Marlboro …, 2014). The regulation has limited the
entrance of big forces in the market despite the big boom. However, Barry et al. (2014) warn
us when he writes:
Legislators, regulators, and members of the public considering the legalization of
marijuana must take into account that multinational tobacco companies are
prepared to enter the market with incentives to increase the use of the drug. […] It is
important that tobacco control advocates and the public understand the clandestine
research and analyses that the tobacco industry has conducted regarding potential
marijuana legalization as well as the tobacco industry’s role in turning cigarettes into
the world’s most widely used delivery system for the addictive drug nicotine, the
leading preventable cause of death, to prevent the industry from repeating this
history with marijuana if given the opportunity.

Kristof (2014) also saw the potential risk of federal legalization:
After all, once the legal hurdles are cleared, there’s nothing to stop deep-pocketed
companies, including the tobacco giants, from entering the business and squashing
today’s upstarts.
The entrance of existing big corporations in the market would have an important impact on
existing shops and would also change the majority of the competitive landscape
characteristics.
New York
Considering the speed at which the marijuana industry grew in the states that
legalized it, there is a great chance that New York will rapidly become the most important
state in the recreational marijuana business. New York will have to face a short-term
adjustment period where prices will be subject to substantial changes and supply of
marijuana won’t be effective. In the face of strong consumer demand, marijuana prices
doubled at the 37 licensed shops in Colorado and many shop owners instituted temporary
purchase limits so they could serve more customers (Gillespie, 2014). While some shops
have temporarily run out of the product, most haven't because they can let markets
determine prices that reflect customer demand (Gillespie, 2014). However New York can
learn from the other states’ errors and limit or avoid Colorado's and Washington's
adaptation problems.
Based on a study done by Bennett (2014) on the impact of legalization on the city of
Denver, the economic consequences of legalization would be felt in a state’s overall
productivity:
New tourism concerns have cropped up, such as a 'Bud and Breakfast' business and
companies such as Colorado Green Tours that show consumers and business people

around. There are restaurants just for people with the munchies, and a lot of new
revenue. 'Commercial real estate in Denver is having a boom,' says Nelson. 'We're
fourth in the nation for job creation.' But perhaps the biggest change is attitudinal,
adds Dietrich, 'Everyone is incredibly friendly in Denver'
One may predict that the impact would be the same on New York’s economy due to new
economic opportunities. New businesses would rise and tourism would be even greater
which would shift the GDP curve up and influence the real estate market.
Conclusion
While it is impossible to predict in advance what the effects of legalization will be on
marijuana-usage rates 20 years from now, many in the burgeoning marijuana industry
believe that it will be approximately the same for marijuana as it was for alcohol (Schneider,
2014). Due to a better understanding of the health consequences of marijuana consumption
and a raise of awareness of the social surplus associated to it, society is in the process of
considering it as a substitute to alcohol which results in a raising demand. The legal status of
marijuana market is experiencing various changes leading to new opportunities of
investment, products and shifts in the industry. New York will certainly have adopted
legalization before federal law does, providing a new industry, hence new businesses.
Federal legalization would intensify the industry competition now facing the international
market. However, considering New York’s global reach and financial stability, federal
legalization may be a chance for New York recreational marijuana businesses to lead the
international market. New York’s important business spirit would most likely provide a major
shift in the industry. As happened with alcohol after the end of Prohibition, and has also
happened with tobacco, the marijuana industry would probably come to be dominated by a
few giant corporations (The Marlboro …, 2014), potentially headquartered in Manhattan.

Exhibit
EXHIBIT I: PEOPLE THINKING MARIJUANA CONSUMPTION IS MORALLY WRONG
EXHIBIT II: PERCENTAGE OF PEOPLE SAYING MARIJUANA SHOULD BE LEGALIZED INCREASED
The great pot experiment, Legalising a drug is harder than it looks, 2014
Gao, 2015

EXHIBIT III: REDISTRIBUTION OF INDUSTRY TAX REVENUES
Colorado Marijuana Tax Data, 2014
EXHIBIT IV: LEGAL MAP
Nelson, 2014

EXHIBIT V: INDUSTRY'S LIFE CYCLE
Industry Outlook, 2015

EXHIBIT VI: TAX IMPACT 23
Clement et al., 2010

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