Pennsylvania’s adult-use market will be established either in this year, or the following. That’s the prediction laid out by Gibran Washington, chief executive of Pennsylvania-based Ethos Cannabis – and he’s willing to put money on it.
He said the primary question is: What kind of market structure will lawmakers authorize? And what will be included in details such as marijuana tax rates at state level?
“We’re excited. We think it’s going to happen … Whether the governor wants it this year, based on what we’re seeing from the financial outlook of the state of Pennsylvania, they’re going to need it by next year,” Washington said, referring to Pennsylvania’s $3.6 billion budget shortfall. Cannabis is the most likely solution to both ends of this gap.
Washington has been in contact with the governor. Josh Shapiro’s team, when asked how legalization might work in Pennsylvania, stated that the state legislature has “couples of competing bills,” which lay out different visions of a recreational marijuana market.
The bill, sponsored by Democrats, would allow the state to run a marijuana-related industry similar to that of its liquor-related industry. Washington is skeptical that this framework will be implemented. Another model on the table for lawmakers – and Washington’s preference – includes a social equity program, retail license caps, and allows licensed medical operators to transition seamlessly into adult-use sales.
Washington said that “it’ll sort of be a combination between those two.” We don’t think the state model is going to be involved by the end of the day. “It would be far too complex for the state’s to decide how it’s going to cultivate cannabis, and then to sell cannabis.”
Washington stated that he is eager to see the state make this leap so Ethos’ full expertise can be brought to bear on its own state. This will allow Ethos to bring the same vertical integration it has done in Massachusetts and Ohio to its native state. He’s also looking forward to expanding further.
Ethos already has plans to enter Connecticut, Kentucky and New Jersey. They would be interested in any market they could establish vertically, so New York is out.
We expect a lot more distressed assets to come onto the market over the next 12 months if not earlier. They should be able be good additions into our core businesses, regardless of whether they’re in three states we are currently in, or in another state that we are currently considering, particularly if it is a route towards verticality,” said he.
Ethos is already profitable, Washington said, a mere six years after the company was founded in 2019, thanks primarily to its lean-and-mean strategy that relies on efficiency and adapting to current market conditions – as opposed to pinning hopes on federal reforms like rescheduling, the SAFER Banking Act and 280E tax relief.
“We operate our businesses as if there is no chance of anything ever changing. This is how we assess our business. Is this business viable if nothing changes? Washington responded.
Ethos faces some major challenges in its future, such as the threat of competition from the illegal marijuana and hemp markets.
The black market has been our main concern for many years. We were fighting against the “legacy operators” in this field. Washington explained that “this gray market sort of appeared with hemp.” Washington said, “They’re the greatest threat to our survival because they are storefronts, and unlike the black markets where people still trade person to individual, this group has storefronts.”
Washington is also concerned about the potential for backlash from regulators and consumers if contaminated hemp THCA flowers sicken customers. He said that this could become a black mark against “the entire (cannabis industry).
We were most concerned about the black-market operators who had been shipping from California, but they no longer do so. “They’re simply showing up at the storefronts, with huge jars full of marijuana,” said he.
Ethos, Washington’s team, is prepared to work hard to achieve success.
“This is not an easy way to become rich. This is not a ‘You can do everything because you’ve dream it’ kind of industry,” Washington said. “It’s, ‘What can we make money on and what can we do at scalable levels to turn good margin and good profits?'”