Less than 20 years ago California voters ushered in the beginning of the end of marijuana prohibition with an initiative to allow medical marijuana. Medical marijuana laws have since spread to almost half the states. Further, many states have decriminalized small-time pot possession while two have enacted recreational marijuana legalization.
Alaska, Oregon, and the District of Columbia may legalize marijuana use in 2014, with California, Nevada, Arizona, New Mexico, and Montana coming on board in 2016. If big Midwest states like Ohio and Michigan join in, the heartland of the country will join the new regulatory regime. One or more of the New England states will also likely legalize marijuana following the 2016 elections.
After 2016, legislators in the remaining states will want to share in a growing marijuana revenue stream. By the year 2025 federal marijuana prohibition will be history, after over 40 states have legalized it, while remaining states will likely allow people to grow and consume their own, even without sales, such as is now the case in Hawaii.
There will be different approaches to legalization at state stores, private retail outlets, and gourmet boutique stores. There will be different product lines and different tax and regulation schemes.
The federal government may effectively set retail marijuana prices by imposing a two-tiered excise tax that will only kick in if individual states do not pass their own excise tax. If California, for example, chooses to impose no excise tax, it may gain no competitive advantage because of such federal excise tax. This regime will discourage states from imposing high excise taxes because they will be undercut by neighbor states. After legalization, the struggle will be about legislative committees, zoning boards, and product packaging disputes, and multiple interests will be at play.
Marijuana users constitute the vast majority of all currently illicit drug users. After legalization the number of illicit drug users will drop from more than 20 million to roughly 2 million and “the drug war” may simply collapse for lack of purpose.