New York competing with New Jersey for marijuana dollars

Yahoo Finance’s Alexis Keenan, Kristin Myers, and Alexis Christoforous discuss projected cannabis market within New Jersey and New York.

Video Transcript

KRISTIN MYERS: Recreational marijuana use has now been legalized in both New York and New Jersey. And you might be wondering, in which state should you purchase your weed? Well, no need for hand-wringing over this decision. We've got Yahoo Finance's Alexis Keenan here for details and the answer to that question. And Alexis, I know you say that it is a little bit more complicated than just New York over New Jersey.

ALEXIS KEENAN: Yes, it's going to be a kind of wait and see. But I'll give you the details. So there were all of these press articles coming out last week when New York finally legalized recreational adult use, with analysts quick to say that the state-- that New York state would become the second largest market in the US. Now I've got a graphic to show you. And it's from New Frontier Data. And it's in line with what other analysts say. And that is that they're estimating by 2025, that New York's market will grow to $3.7 billion. That would be just behind California at $6 billion and ahead of Illinois, Michigan, and Colorado.

So, one reason for that projection is New York's sheer resident population at 19 and 1/2 million people. Second reason is really key, is tourism. And New York City, of course, attracts more visitors than any other US city. So New York has a lot going for it there in sheer numbers. But then I said, well, what about New Jersey? They just legalized as well, adult use marijuana now legal as of February. Well, particularly because the state has these porous borders with New York, particularly with New York City, where you have, in normal non-COVID times, residents going and commuters going back and forth between the states regularly in this region. And also, the agricultural strengths of New Jersey.

So I was questioning whether is New Jersey getting really downplayed as a real contender in these cannabis markets. So if you look at New Jersey's population, you have about half as many residents. You have 9 million residents to New York's 19 and 1/2 million. So that is, you know-- that's one element. But what gets really, really interesting is that the number of visitors to New Jersey who are expected to participate in the cannabis market are in numbers that really rival New York state.

I've got another graphic to show you also from New Frontier. This is also by the year 2025, so just four years approximately from today. You have New York expected to have 22.3 million tourist participants and New York with 22.9 million participants. So, really not so bad there.

Now, another thing that is really tricky-- and it's going to take some time to see how this plays out-- is the potential influence that will have people may be buying in one state or another, really weighing where they should go and whether they should cross that border. And those are the state taxes. If we look at New York, they are planning for a 9% state tax on top of that 4% local tax for approximately 13% there on a cannabis purchase. There's also a THC tax, but that's paid at the distributor level, and it's product-based.

Now, New Jersey, on the other hand, has a much lower sales tax at 6.625. That could be really advantageous. Though and then they have this sliding scale that goes from $10 to $60 per ounce on top. That's a state excise tax. And then they have these really, really confusing local taxes that have many, many layers that could get added on. So, we'll have to wait and see who is going to be able to attract more cannabis buyers. But right now, there are some really big differences between the two laws.

ALEXIS CHRISTOFOROUS: And Alexis, I would imagine another difference would be how much you can actually buy at any given time or be in possession of. Is there a big difference there between New York and New Jersey?

ALEXIS KEENAN: There is, Alexis. And I think this is going to be really key. Now both states have made it possible for people to consume cannabis, in particular, lounges that have the license to have consumption on premises. However, for the cannabis buyer, in New Jersey, those folks are going to be able to have 6 ounces of-- possess cannabis with them on their person. In New York, it's half that at 3.

So when you think about how that translates to a buying environment, in New York, perhaps you're going to have to go to more places to get more cannabis in order to take with you. So that should come into play, too. And certainly, I have to ask myself as a resident who's lived on both sides of the Hudson, you know, whether if a customer is looking for cheaper cannabis, if they'll just say to their colleague or their friend, hey, when you're back and forth from the city, could you just pick me up something? Maybe I'll save 50 bucks.