Profiting From Marijuana Legalization

- Friday, November 9th, 2012

Federal law has gone up in smoke...

Presently, 18 states plus Washington D.C. have adopted state laws allowing people to use, possess, and distribute medical and recreational marijuana in a regulated market; against federal mandates.

Here's what Colorado's governor had to say about his state's decision to legalize cannabis: “The voters have spoken and we have to respect their will. This will be a complicated process, but we intend to follow through.That said, federal law still says marijuana is an illegal drug so don't break out the Cheetos or Goldfish too quickly."

These aren't only 'high times' for recreational users, but small business owners as well. Experts say that, globally, this is a $300 billion business in the making. The U.S. alone will make-up about one-third of this booming industry.

From the business perspective, this could provide a strong boost to our economy. Instead of spending millions on arrest, fines, and incarceration, legalizing the drug will inject money into the economy in the form of jobs, tax revenue and profit for small businesses that sell the plant.

An astonishing 750,000 people are arrested every single year in the U.S. for a marijuana violation. Of those, about 40,000 end up in state and federal prison after being convicted of those related crimes – usually distribution.

Considering that prisoners cost taxpayers more than $32 billion a year, you'd think taxpayers would be jumping for joy at the notion that they could cut back substantially on that number by canceling at least 40,000 inmates from that equation.

Instead, we could enjoy an additional $14 billion distributed throughout our economy if the entire nation accepted the legalization of a regulated marijuana market. According to the 2010 Cata Institute paper The Budgetary Implications of Drug Prohibition, that would produce roughly $8.7 billion in tax revenues and savings.

Just take a look at California for example. The state generates at least $105 million in taxes each year for the marijuana industry alone. Hourly “budtenders” make $10-$20 an hour and the industry has opened up dozens of other positions including receptionists, growers, doctors, chefs, managers, and even delivery drivers.

Here are some more financial statistics to consider, compiled by Fiscal Times:

• $400,000 — The expected annual profits of a small 224-plant growing operation in the basement of a licensed marijuana grower in Colorado.

• $150 million – The estimated revenues of the medical marijuana industry in just manufacturing and equipment spending in 2010.

• $18.95 — The price of a paperback copy of Aunt Sandy’s Medical Marijuana Cookbook: Comfort Food for Mind and Body. Included are recipes for lemon bars, turkey with stuffing, buffalo wings, tomato bisque, chicken curry, and many more.

• $100 — The maximum fine in New York State for a first-time charge of possessing less than 25 grams of weed.

• $5,000 — The maximum fine for selling 25 grams to 4 ounces of pot in New York State. This is considered a felony and can result in up to 4 years in prison.

• $240,304 — Cost of 4 years of incarceration in a New York State prison ($60,076 a year).

• 82 percent — The proportion of the 50,000 people arrested in New York for small amounts of marijuana in 2011 who were black or Latino.

Marijuana has the potential to become one of the most profitable commodities in our modern economy. Profit margins are unprecedentedly 'high' leaving room for a minimum of a 3,400% gain, according to Wealth Daily.

To find the top five marijuana-related stocks to play as states began to legalize the substance, continue reading here.