Pot of gold

Placing aside the morality of marijuana use, let’s consider how much money Virginia is currently leaving on the table without a regulated, taxed recreational cannabis market.

In 2020, directed by the Virginia General Assembly, which was then under Democratic control, the Joint Legislative Audit & Review Commission conducted a study on legalizing marijuana in Virginia.

If commercial recreational sales of marijuana were legalized and taxed at 20% to 25%, JLARC estimated the state would reap between $147 million and $300 million in annual net tax revenue. (Some legislators would likely push for lower taxes, which would persuade more marijuana users to move away from the black market, experts say.)

Legalization is also popular with voters; 60% of Virginia voters polled this year by Christopher Newport University support allowing retail sales of recreational marijuana, including 44% of Republicans polled.

Currently, Virginia’s cannabis laws sit in a gray area: We have licensed dispensaries of medical marijuana, and it’s legal now to possess small amounts of marijuana for recreational use. But that leaves a giant black market that may amount to as much as $2.4 billion in marijuana sales in the commonwealth for 2023, estimates New Frontier Data, a Washington, D.C.-based data and analytics firm focused on the cannabis industry. By contrast, Virginia’s three operating casinos reported about $407 million in total revenue between January and October, according to the Virginia Lottery.

We can’t say for sure that legal recreational cannabis sales to adults would immediately pull that entire $2.4 billion away from black market sources, but it indicates a massive amount of potential untaxed revenue if Virginia legislators and Gov. Glenn Youngkin do nothing to regulate cannabis during the 2024 General Assembly session.

Although Virginia Department of Agriculture and Consumer Services Commissioner Joseph Guthrie said in July that Youngkin was “not interested” in further legalization, Youngkin has not made any definitive public pronouncements — however, he is viewed as having worked behind the scenes to scuttle legislation legalizing retail sales of marijuana.

In the 2023 session, the GOP-controlled House of Delegates killed Republican- and Democrat-sponsored bills that would have set up a regulatory structure for retail sales in 2024. The Cannabis Control Authority,  which will regulate the state’s medical marijuana industry beginning in January, saw its operations budget cut by $2.9 million to $5.3 million.

In February, VPM quoted the governor as saying that the matter is up to state legislators: “They’ve got to go do the work.”

So, where are state legislators on this? Gentry Locke Consulting President Greg Habeeb, a former Republican state delegate who now represents the Virginia Cannabis Association as a lobbyist, says conditions may be right for passage of legalized retail sales, with Democrats holding narrow majorities in both chambers.

Although Youngkin — who is rumored to be interested in running against U.S. Sen. Tim Kaine in 2024 — would not want a metaphorical scarlet pot leaf hung around his neck by other Republican senatorial contenders, he has a rhetorical defense for further legalization, Habeeb notes.

Possession of small amounts of cannabis is already legal in Virginia, as are sales for medical use. Youngkin could argue that allowing recreational sales to adults in regulated, licensed dispensaries — instead of illegally through black market dealers — is part of his public safety mandate, similar to his administration’s support of hemp regulation and enforcement.

One shortcut toward creating a state-regulated retail structure would be to allow the four companies already holding medical marijuana licenses to expand into recreational sales.

Also, there’s the question of social justice. In 2020, Virginia Democrats put forward the idea that people who were disproportionately harmed by arrests and convictions under earlier cannabis laws — mainly people of color — should benefit financially through legalization and licensing. To many Republicans, that sounded a lot like reparations, a controversial idea that would be difficult to pass under any circumstances in Virginia. But now, there’s more talk about changing legislative and policy language to focus on the “economic opportunity” around cannabis. Bipartisan retail cannabis bills that failed in the 2023 General Assembly session are expected to be refiled for the 2024 session, which convenes Jan. 10, 2024.

Even with Democrats once again in control of the state legislature, it’s likely to come down to Youngkin’s calculations and veto power.