As COVID-19 brings economic growth to a standstill, some in the U.S. believe there’s a way out.

“When we all start to be able to lift our heads from this COVID experience, we are going to be faced with a scenario where a lot of jobs have gone away,” Charlie Bachtell, CEO of U.S.-based cannabis company Cresco Labs, tells CNBC. “How are we going to bring that back? I think cannabis has to be part of that discussion,” he says.

Cannabis is a revenue generator — and therefore, a tax generator, adds Boris Jordan, executive chairman for U.S.-based Curaleaf. “One of the programs by the federal government right after the Great Depression was to focus on tax revenue generation,” Jordan tells CNBC. “They lifted prohibition on alcohol and therefore started to tax it — and it became a major revenue generator for both the federal and the local governments around the country.”

While the U.S. cannabis industry may appear confident in its gospel of economic relief, if there’s anything to be learned from Canada’s example, things don’t always turn out as predicted.

“The U.S. is vastly overestimating,” warns Windsor, Ont.-based Craig Wiggins, a managing director at independent analysis firm, The Cannalysts. “We thought it was bad in Canada with our patchwork of government regulations and different roll-out across provinces. They have 50 states. It’s going to be difficult down there because they are going to be faced with all these regional quirks.”

Canada’s legalization of recreational cannabis was initially touted as an economic game-changer. But two years later, there’s still a long way to go.

Hype versus reality

Prior to legalization, Deloitte’s 2018 cannabis report infamously suggested that the first year of legalized marijuana sales in Canada would reach $4.34 billion. What Deloitte and forecasters failed to comprehend was both a lack of public interest in buying cannabis and the regulations that would make selling cannabis more difficult than they could have imagined.

“A lot of projections, like the one by Deloitte, had people think the rollout wouldn’t be impeded by lack of political will and regulations,” says Wiggins. “But regulations came in like unexpected meteor strikes. (It was) like, ‘Whoa, that’s not going to be good for the market.’ And we had a lot of meteor strikes going forward.”

“Everybody wants the economy to stabilize, and cannabis has the potential to help with a major economic shift of dollars,” says Montreal based Jennifer Larry, founder and president of CBD Strategy Group Inc. “But if the industry is not allowed to operate allowing things to be affordable, accessible, then it might just end up burdening the economy rather than supporting it.”

Now is no time to play it safe

Not helping matters was Canada’s overly cautious rollout. After a year of underwhelming sales and supply issues came the second wave of legalization in which edibles, such as drinks and gummies hit the shelves. But many have criticized the limits placed on these products. Edibles, for instance, can have no more than 10 mg of THC per package.

After a year of slow retail rollout and supply issues came Cannabis 2.0. PABLO PORCIUNCULA BRUNE/AFP via Getty Images

Going slow and low with the dosage has been the government’s way of being responsible and ensuring people get quality products. But it has also been a case of too little for too much. Not everyone is okay paying over $10 for two-piece of cannabis-infused chocolate truffles containing 10 mg cannabis.

“No one is buying an infused brownie for its taste alone,” says Wiggins. What the government doesn’t seem to want to acknowledge is: “They are buying it to get high.”

Black market

While federal and provincial governments made $186 million in various taxes from cannabis in the first five months following legalization, more than 40 per cent of Canadians still sourced cannabis from illegal sources.

Over 40 per cent still sourced cannabis from illegal sources in the first five months following legalization.

“It’s a tradeoff — the more you increase taxes the more revenue you get, but that increases prices and makes you less competitive with the black market,” Brock University business professor Michael Armstrong told Global News last summer.

Lesson to be learned

Is the U.S. destined to go down a similar road? Or can they learn from how we’ve handled things in Canada? Even in a best case scenario, the federal legalization of marijuana in the U.S. is unlikely to be the instant saviour American cannabis companies are claiming.

But there is still some cause for hope.

It will come down to one thing: “Patience,” says Larry. “It takes time to convert mindsets and to kickstart industries. From the federal perspective, if the United States were to move forward with cannabis legalization, the first thing that it would do is provide people and patients with what they deserve — the ability to access something that should never have been illegal, to begin with.

“And because of that, because of that kind of momentum, it will also be positive in supporting the growth in the economy because people would want to buy these products.”