Case 3Pot of Gold? The US Legal Marijuana Industry*

By 2018, the legal marijuana industry had established itself as a significant component of both the US agribusiness and medical sectors. Retail sales of legal marijuana in 2017 were estimated at $9 billion by BDS Analytics—most of it for medically‐approved use. The 2017 US marijuana crop was valued (at wholesale prices) at $5.7 billion by Cannabis Benchmarks—as compared to the US wheat crop of $7.4 billion. For the states in which marijuana was legally cultivated and distributed, the benefits included 121,000 direct jobs and $1.2 billion in tax revenues.1

Medium‐term projections for the industry pointed to continued strong growth. ArcView—a marijuana information, consulting, and investment firm—forecast that, by 2021, US consumer spending on legal cannabis would total $20.8 billion, and that the industry would generate 414,000 jobs and more than $4 billion in tax revenue.2

Like most growth industries, the industry has attracted considerable financial interest. Some of the venture capital and private equity funds investing in the industry are listed in Table 1. Investment in the marijuana sector was also facilitated by ArcView Group's intermediating role in linking investors with marijuana entrepreneurs had generated a buzz of excitement about this “new gold rush.” By October 2017, its network of angel investors had invested $125 million in 157 cannabis‐sector companies.

TABLE 1 Private equity and venture capital funds investing ...

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