The CEO of a Canadian cannabis company is expecting that the United States is headed for cannabis legalization in the next two years.
David Klein, the head of Canopy Growth, told CNBC's Jim Cramer on Tuesday that as states continue to gradually permit medical and recreational use of marijuana, Congress will have no choice but to act.
"My assumption is that 2022, for me, is the magic number," he said in a "Mad Money" interview. "I think, as you watch more and more states move to legalization for medical or rec, you really bring in almost two more senators each time who are really going to feel compelled to not make criminals out of the people in their state who are doing what's legal in their particular state."
Klein, the former chief financial officer of alcohol producer and large Canopy stakeholder Constellation Brands, was responding to a question from Cramer about how state and local governments, whose budgets have been severely stretched by the coronavirus pandemic, could legalize the weed business as a way to bring in more revenue. Colorado, which was among the first states to legalize marijuana in 2012, reported collecting $133 million in taxes and fees related to cannabis commerce between January and May.
The industry, however, was locked out of the federal government's massive coronavirus small business relief program as sales slumped in the month of March in states such as Colorado and Nevada.
Still, American cannabis companies expect that the pandemic will speed up legalization at the federal level after multiple states declared dispensaries essential businesses during the Covid-19 lockdown.
"The revenue opportunity is huge," said Klein, who heads up a $6 billion company. "I've seen some really large numbers in terms of the amount of cash flow that would come into the government as a result of just a normal excise tax regime."
Marijuana has been legalized in a dozen states and remains fully illegal in 11 others. The remaining states have decriminalized the plant in some form. Cowen forecasts the U.S. cannabis market will be worth about $56 billion in 2020 and all but 10% will be handled on the black market.
Virginia is set to decriminalize simple marijuana possession on July 1 and will be the 27th state to have done so.
"You know, not to mention that it doesn't make sense that cannabis isn't legal already," he continued. "Alcohol prohibition [ended] 87 years ago, and [I'm] not really sure why cannabis was left off that list."
Klein became CEO of Canopy Growth in December after founder Bruce Linton was forced out by Constellation earlier that year. Constellation Brands invested $4 billion into the business.
Canopy shares rose 6% in Tuesday's session. The stock price remains down 15% year to date.