The $148 Billion Cannabis Market: Why Big Pharma and Alcohol Companies Are Investing

Key Takeaways

• Traditional opponents of cannabis legalization, including pharmaceutical, tobacco, and alcohol companies, have invested heavily in the cannabis market as legalization gains momentum.
• While private prisons, conservative advocacy groups, and certain religious organizations remain staunchly opposed, financial incentives are shifting the broader industry landscape toward acceptance.
• The financial performance of cannabis investments has been mixed, but companies positioned for eventual federal reform appear to be gaining strategic advantages despite short-term volatility.
• International corporations are increasingly positioning themselves for global cannabis market expansion, viewing U.S. federal prohibition as a temporary barrier rather than a permanent obstacle.
• Labor unions have taken varied positions on cannabis, with those representing law enforcement and corrections workers opposing legalization while others actively organize within the cannabis industry.
• The COVID-19 pandemic accelerated cannabis normalization through essential business designations and increased consumer acceptance.
• The changing strategies of these industries reflect not just the growing acceptance of legal cannabis but also pragmatic business adaptations to market realities that transcend ideological positions.

The cannabis legalization movement has faced strong opposition from powerful industries and advocacy groups in the United States. Historically, pharmaceutical companies, the alcohol and tobacco industries, private prisons, and conservative organizations have been the primary opponents. However, as cannabis legalization spreads and the market grows, some of these groups have changed their stance and invested in the industry they once opposed.

The global legal cannabis market was valued at approximately $25.7 billion in 2021 and is projected to reach $148.9 billion by 2031, growing at a compound annual growth rate (CAGR) of 20.1%. This explosive growth has not gone unnoticed by former opponents, who are increasingly positioning themselves to profit from cannabis legalization rather than fight it.

This article explores the major players still opposing legalization, their resistance, and how some have adapted to profit from the cannabis boom. We’ll also examine the financial implications of these strategic shifts and what they mean for the future of the cannabis industry.

Key Groups Opposing Cannabis Legalization

Pharmaceutical Companies

Reason for Opposition:

Cannabis is viewed as a threat to the market dominance of prescription drugs, especially painkillers, anxiety medications, and sleep aids. Legal cannabis could significantly reduce the demand for opioids and synthetic alternatives, directly impacting pharmaceutical profits.

Measurable Impact on Pharmaceutical Sales:

• In states with medical cannabis laws, prescription drug use decreased by approximately 11% for specific conditions, including pain, anxiety, and sleep disorders.
• Medicare Part D prescriptions for opioids decreased by 14% in states with medical cannabis dispensaries, according to a landmark JAMA Internal Medicine study published in 2018.
• A University of Georgia study found that in medical cannabis states, pharmaceutical companies producing pain medications lost nearly $10 billion in market value following legalization.

Measures Taken:

Funding Anti-Legalization Campaigns:

• Insys Therapeutics donated $500,000 to oppose Arizona’s Proposition 205 in 2016. Ironically, the company later developed synthetic cannabinoid products.
• PhRMA (Pharmaceutical Research and Manufacturers of America) spent approximately $27 million on lobbying in 2022-2023, with significant portions directed at opposing federal cannabis banking reform and research expansion.

Lobbying Efforts:

• The pharmaceutical industry as a whole has spent over $100 million annually on lobbying efforts, with cannabis policy representing an increasing share of this spending.
• Partnership for Safe Medicines, a pharma-backed coalition, has consistently published reports linking cannabis legalization to public health concerns, particularly in states considering legalization between 2020-2023.

Clinical Trial Design:

• Several major pharmaceutical companies have designed clinical trials that compare isolated cannabinoids to whole-plant cannabis, often structured to favor pharmaceutical derivatives over natural products.

Tobacco and Alcohol Industries

Reason for Opposition:

Both industries initially feared that legalized cannabis would compete with their market share, especially among younger consumers. Studies show that in states with legal cannabis, alcohol sales have decreased by approximately 15% in certain product categories.

Measures Taken:

Lobbying Against Legalization:

• The Wine & Spirits Wholesalers of America spent $3.6 million in 2022 lobbying on alcohol and cannabis-related issues.
• Beer distributors contributed over $5 million to anti-legalization campaigns across multiple states from 2016-2023.
• Distilled Spirits Council has advocated for regulatory frameworks that would restrict cannabis beverages to protect alcohol market share.

Funding Research:

• Alcohol industry-funded studies highlighting cannabis risks, particularly impaired driving, often receive prominent media attention.
• The Foundation for Advancing Alcohol Responsibility has published numerous reports on cannabis and driving impairment while downplaying alcohol’s comparatively higher risks.

Private Prisons and Law Enforcement

Reason for Opposition:

The War on Drugs, including cannabis-related arrests, has been a significant source of revenue for private prisons and law enforcement agencies. Cannabis prohibition has directly supported thousands of jobs in the criminal justice system, and legalization threatens this economic ecosystem.

Financial Incentives:

• Law enforcement agencies in prohibition states receive approximately $3.6 billion annually in federal grants tied to cannabis interdiction efforts.
• Asset forfeiture from cannabis-related arrests generated approximately $32 million in revenue for law enforcement agencies in non-legal states in 2022.
• Each inmate in a private prison generates an average annual revenue of $40,000, with cannabis offenders making up approximately 8% of the federal prison population.

Measures Taken:

Lobbying for Prohibition:

• CoreCivic (formerly Corrections Corporation of America) and GEO Group, the two largest private prison companies, have spent over $5 million collectively on lobbying efforts that include opposition to cannabis legalization.
• The National Sheriffs’ Association continues to oppose legalization efforts, spending approximately $1.2 million on lobbying against the MORE Act and SAFE Banking Act.

Public Fear Campaigns:

• National Association of Police Organizations (NAPO) regularly testifies against federal cannabis reform, citing concerns about impaired driving and workplace safety.
• The Fraternal Order of Police has released position papers opposing legalization in multiple states, particularly focusing on concerns about field sobriety testing limitations.
• Police unions have funded public awareness campaigns highlighting isolated incidents of cannabis-related accidents in legal states.

Conservative Advocacy Groups

Reason for Opposition:

Moral and cultural concerns drive these groups, often linked to anti-drug messaging and concerns about youth exposure. Many conservative groups view cannabis prohibition as part of a broader culture war on traditional values.

Measures Taken:

Grassroots Campaigns:

• Smart Approaches to Marijuana (SAM) continues to be one of the most active opposition groups, with a 2022-2023 budget exceeding $4 million for media campaigns emphasizing risks like addiction and mental health issues.
• Parents Opposed to Pot maintains an active presence in school districts, distributing materials linking cannabis to adolescent brain development issues.
• Family Research Council regularly includes cannabis opposition in its policy agenda, connecting legalization to “moral decline.”

Lobbying Against Federal Reform:

• Conservative think tanks like the Heritage Foundation and American Enterprise Institute have published numerous policy papers against federal legalization on public health and federalism grounds.
• Faith & Freedom Coalition has mobilized evangelical voters against cannabis reform in key swing states.

Religious Organizations

Reason for Opposition:

Cannabis use is often framed as a moral issue, with some religious groups associating it with societal decline and substance abuse. However, religious opposition is not monolithic, with significant variations across denominations and regions.

Measures Taken:

Community Engagement:

• The Mormon Church played a significant role in opposing Utah’s medical cannabis initiative, eventually compromising on a more restrictive program.
• Southern Baptist Convention has passed multiple resolutions opposing cannabis legalization and encouraging members to lobby against reform.
• Catholic dioceses in several states have funded educational programs discouraging cannabis use among youth.

Political Support:

• Religious organizations have formed strategic partnerships with conservative politicians to resist cannabis reform at the state level.
• In states with significant religious populations, like Utah and Oklahoma, religious leaders have successfully advocated for more restrictive medical cannabis frameworks.

Healthcare Industry Opposition

Medical Associations

The stance of medical associations has evolved significantly but remains complex. While many have acknowledged cannabis’s medical potential, concerns about standardization, dosing, and clinical research persist.

American Medical Association (AMA):

• Officially opposes recreational legalization while supporting rescheduling to facilitate research
• Has consistently advocated for more clinical trials before broader medical acceptance
• Published position papers citing concerns about adolescent use and dependency

American Society of Addiction Medicine:

• Remains opposed to recreational legalization while supporting decriminalization
• Advocates for treatment rather than incarceration for cannabis offenses
• Expresses concerns about commercialization and marketing of high-potency products

Insurance Industry

Coverage Limitations:

• Major health insurers like UnitedHealth, Anthem, and Cigna continue to exclude cannabis coverage, citing federal prohibition
• Workers’ compensation insurers have actively lobbied against workplace cannabis protections in legal states
• Property and casualty insurers charge significant premiums for cannabis businesses, often 3-5 times higher than comparable non-cannabis operations

Research Funding:

• Insurance industry groups have funded studies highlighting risks of cannabis use, particularly focusing on workplace accidents and impaired driving
• Several insurance trade associations have established cannabis working groups to develop industry positions opposing expanded access

Labor Unions and Cannabis

Opposition from Established Unions

Prison Guard Unions:

• American Federation of State, County and Municipal Employees (AFSCME), representing prison workers, has lobbied against legalization in several states due to concerns about job losses
• California Correctional Peace Officers Association spent $1 million opposing California’s recreational legalization
• Estimates suggest that full federal legalization could eliminate 20,000-30,000 corrections positions nationwide

Law Enforcement Unions:

• National Border Patrol Council has opposed federal legalization efforts, citing concerns about cross-border trafficking and enforcement challenges
• Various state trooper associations have funded campaigns against legalization initiatives, particularly in Michigan, Illinois, and Arizona
• Police unions cite concerns about workplace testing capabilities and standards for impairment

Pro-Cannabis Union Development

As the cannabis industry matures, labor unions have increasingly organized workers in this sector, creating an interesting dynamic where unions simultaneously oppose and support cannabis, depending on their membership base.

United Food and Commercial Workers (UFCW):

• Represents over 10,000 cannabis workers across the United States
• Negotiating labor agreements with former opposition companies now investing in cannabis
• Has established Cannabis Workers Rising campaign to organize dispensary workers

Teamsters:

• Established cannabis divisions in California, Colorado, and Illinois
• Organizing transportation and distribution workers within the industry
• Successfully negotiated contracts with major multi-state operators

Service Employees International Union (SEIU):

• Beginning to organize cannabis retail workers, particularly in northeastern states with recent legalization
• Advocates for expungement and social equity provisions in legalization legislation
• Provides workforce development programs for disadvantaged communities entering the cannabis industry

Political Figures and PACs

Anti-Cannabis Political Action

Political Action Committees:

• Drug Free America Foundation has contributed over $3 million to candidates opposing cannabis reform since 2020
• Casino magnate Sheldon Adelson (prior to his death) donated approximately $9 million to anti-cannabis campaigns across multiple states
• Law Enforcement Action Partnership PAC continues to fund candidates opposed to legalization

Key Political Opponents:

• Senator Chuck Grassley (R-Iowa) has consistently blocked cannabis banking legislation in committee
• Former Attorney General Jeff Sessions rescinded the Cole Memorandum that protected state-legal cannabis businesses
• Governor Greg Abbott of Texas continues to oppose comprehensive medical cannabis expansion despite public support

Political Position Shifts

Interestingly, several formerly anti-cannabis politicians have reversed their positions, often after leaving office or in response to changing constituent views:

Former House Speaker John Boehner:

• Previously opposed all forms of legalization
• Joined the board of cannabis company Acreage Holdings in 2018
• Now advocates for federal reform and cannabis investment

Former Senator Cory Gardner (R-Colorado):

• Initially opposed Colorado’s recreational legalization
• Became a leading Republican advocate for cannabis banking reform
• Now works as a cannabis industry consultant

Vice President Kamala Harris:

• Oversaw numerous cannabis prosecutions as California Attorney General
• Evolved to support legalization during her Senate term
• Co-sponsored the MORE Act to federally deschedule cannabis

Changing Strategies: Investments in Cannabis by Former Opponents

Major Investments by Pharmaceutical Companies

Jazz Pharmaceuticals:

• Acquired GW Pharmaceuticals for $7.2 billion in 2021
• Continues to market Epidiolex, an FDA-approved CBD-based drug for epilepsy
• Developing additional cannabinoid medications for multiple sclerosis and other conditions
• Significance: Represents the largest pharmaceutical investment in cannabis to date

Pfizer:

• Entered the market in 2022 with a $6.7 billion acquisition of Arena Pharmaceuticals
• Portfolio includes several cannabinoid-based therapeutics in clinical development
• Focusing on synthetic cannabinoid receptor modulators rather than plant-derived compounds
• Significance: Signals mainstream pharma acceptance of cannabinoid medicine

Johnson & Johnson:

• Through its innovation incubator JLABS, began supporting cannabis biotech startups focusing on novel delivery systems and formulations
• Invested in research exploring cannabinoids for pain management alternatives to opioids
• Significance: Represents a strategic hedge while maintaining public neutrality on legalization

AbbVie:

• Continues to produce Marinol, a synthetic THC product used to treat nausea and loss of appetite in chemotherapy patients
• Filed multiple patents for new cannabinoid delivery systems
• Significance: Pioneered pharmaceutical cannabis products before recreational legalization gained momentum

Shifting Research Priorities:

• Big Pharma has filed over 400 cannabinoid-related patents in the past five years
• Research focus has shifted from opposing cannabis to isolating its most profitable compounds
• Development of proprietary cannabinoid formulations that can be patented, unlike natural cannabis

Tobacco Companies Entering the Cannabis Market

Altria (parent company of Marlboro):

• Invested $1.8 billion in Canadian cannabis company Cronos Group
• Recently increased stake to maintain approximately 45% ownership
• Focusing on vaporization technology and pre-roll automation
• Significance: Strategic move to enter the cannabis market as tobacco consumption declines globally

British American Tobacco:

• Invested $175 million in Canadian producer Organigram in 2021
• Established a product development collaboration focusing on CBD products
• Expanded investment by an additional $65 million in 2023
• Significance: Demonstrates commitment to cannabis as a strategic diversification

Imperial Brands:

• Invested £75 million in cannabis research company Auxly
• Partnership focuses on cannabis vaporization technology
• Granted Auxly access to its extensive intellectual property portfolio
• Significance: Leveraging existing expertise in inhalation technology for cannabis applications

Philip Morris International:

• Expressed interest in cannabis through its “beyond nicotine” strategy
• Filed multiple patents for cannabis-related devices
• Established research partnerships exploring cannabis for harm reduction
• Significance: Positioning for eventual U.S. federal legalization

Alcohol Companies Joining the Trend

Constellation Brands (maker of Corona Beer):

• Initial $245 million investment in Canopy Growth in 2017
• Followed by an additional $4 billion investment in 2018
• Currently holds approximately 39% ownership stake
• Significance: Aims to develop cannabis-infused beverages and establish first-mover advantage

Molson Coors:

• Formed HEXO joint venture “Truss Beverages” in Canada
• Developed line of non-alcoholic, cannabis-infused beverages
• Expanded product portfolio to include multiple CBD and THC beverage brands
• Significance: Direct response to declining beer consumption among younger consumers

Anheuser-Busch InBev:

• Formed joint venture with Tilray (now Tilray Brands) worth $100 million
• Researching non-alcoholic THC and CBD beverages
• Significance: World’s largest brewer acknowledging cannabis as both threat and opportunity

Heineken:

• Launched Lagunitas Hi-Fi Hops, a cannabis-infused sparkling water, through its craft subsidiary
• Expanded distribution throughout California and other legal states
• Significance: Testing cannabis beverages through craft brands before broader corporate commitment

Pernod Ricard:

• Previously opposed legalization through industry associations
• Recently acknowledged exploring CBD beverages for European markets
• Monitoring US regulatory environment for future opportunities
• Significance: Even more conservative alcohol companies are beginning to explore cannabis

International Corporate Movement

Multinational Pharmaceutical Approach

GlaxoSmithKline:

• Initially opposed legalization through industry associations
• Later established research partnerships with Canadian producers
• Developing cannabinoid-based medications for specific therapeutic applications
• Significance: Demonstrates the global nature of pharmaceutical interest in cannabis

Bayer AG:

• Partnered with GW Pharmaceuticals for distribution of Sativex in European markets
• Continues to invest in cannabinoid research while opposing recreational legalization
• Significance: Compartmentalized approach separating medical applications from recreational markets

Novartis:

• Signed global supply agreement with Tilray for medical cannabis products
• Distributes medical cannabis in multiple international markets
• Significance: Major validation of cannabis as legitimate medicine from global pharmaceutical leader

Foreign Investment in US Cannabis

Canopy Growth (Canada):

• Beyond Constellation Brands partnership, has option agreements to acquire US operators like Acreage Holdings upon federal legalization
• Invested approximately $300 million in US hemp operations following the 2018 Farm Bill
• Significance: Positioning for immediate U.S. market entry when federally permitted

Tilray Brands (Canada):

• Acquired Colorado-based Montauk Brewing and SweetWater Brewing
• Strategic positioning through alcohol assets that can convert to cannabis operations
• Significance: Creative approach to establishing U.S. infrastructure despite federal prohibition

Aphria/Tilray (Canada):

• Merged to create one of the world’s largest cannabis companies
• Acquired multiple U.S. craft breweries as strategic entry points
• Significance: Consolidation creating entities with resources to influence U.S. policy

British American Tobacco:

• Invested in Canadian producer Organigram with technology development agreements applicable to US markets
• Established R&D facilities in Canada developing products for eventual U.S. introduction
• Significance: Long-term strategic positioning for U.S. market entry

Recent Developments (2022-2024)

Corporate Positioning for Federal Reform

Amazon:

• Publicly supported federal legalization in 2022-2023
• Ended cannabis testing for most positions
• Began lobbying for the MORE Act despite previous neutrality
• Significance: World’s largest retailer supporting cannabis reform signals mainstream acceptance

Major Banks:

• While directly restricted from cannabis industry involvement, JPMorgan Chase and Bank of America have established internal working groups to prepare for federal banking changes
• Credit unions increasingly serving cannabis businesses through specialized compliance programs
• Significance: Financial infrastructure preparing for eventual federal reform

Tobacco Diversification:

• Altria lobbying for federal legalization through Cannabis Freedom Alliance
• RJ Reynolds established dedicated government affairs team focused on cannabis policy
• Significance: Former opponents now advocating for legalization to protect investments

COVID-19 Impact on Industry Dynamics

Essential Business Designations:

• Cannabis businesses designated “essential” during pandemic lockdowns in most legal states
• Legitimized cannabis businesses in the eyes of regulators and public
• Sales increased approximately 46% during initial pandemic period
• Significance: Pandemic accelerated mainstream acceptance of cannabis as legitimate industry

Pharmaceutical Research Acceleration:

• Pharmaceutical companies accelerated cannabinoid research, with three major clinical trials launched examining cannabis compounds’ potential anti-inflammatory effects
• Research into cannabinoids as COVID treatments further normalized medical applications
• Significance: Pandemic provided opportunity to explore new cannabinoid applications

Alcohol vs. Cannabis Consumption:

• Alcohol sales initially spiked during lockdowns but showed long-term decline in states with legal cannabis
• Cannabis delivery services expanded dramatically, increasing accessibility
• Alcohol companies accelerated cannabis investment in response to changing consumption patterns
• Significance: Pandemic accelerated pre-existing consumption trends favoring cannabis

Federal Reform Momentum

Banking Reform:

• SAFE Banking Act gained unprecedented support, including from former opponents
• Financial services industry actively lobbying for cannabis banking protections
• Significance: Economic interests increasingly driving policy positions

Research Expansion:

• Medical Research Act facilitated expanded cannabis research
• Pharmaceutical companies leveraging research expansion to develop proprietary formulations
• Significance: Scientific research increasingly separated from political opposition

State Market Expansion:

• Legal cannabis markets now cover approximately 70% of the U.S. population
• Conservative states increasingly adopting medical programs despite previous opposition
• Significance: Market growth creating economic imperative that transcends ideological opposition

Financial Analysis: Have These Investments Paid Off?

Investment Performance

Pharmaceutical Cannabis Investments:

• Jazz Pharmaceuticals’ Epidiolex generating approximately $750 million in annual revenue with 20% year-over-year growth
• GW Pharmaceuticals stock rose over 65% prior to its acquisition by Jazz
• Cannabis-derived pharmaceutical patents increased in value by approximately 35% since 2020
• Significance: Medical applications proving most immediately profitable

Alcohol Industry Investments:

• Constellation’s $4 billion investment in Canopy Growth initially lost approximately 50% of its value
• Recovery beginning as U.S. federal reform appears more likely
• Cannabis-infused beverage market growing at 17.8% CAGR
• Significance: Long-term strategic value potentially outweighing short-term losses

Tobacco Industry Moves:

• Altria’s $1.8 billion investment in Cronos Group experienced significant volatility
• Currently valued approximately 30% below initial investment
• However, tobacco companies with cannabis investments outperforming those without
• Significance: Diversification benefits despite initial valuation challenges

Comparative Returns

Opposition vs. Investment:

• Companies maintaining anti-cannabis positions (like major private prison operators CoreCivic and GEO Group) have underperformed the S&P 500 by approximately 40% over the past five years
• Pharmaceutical companies with cannabis-based medications outperforming those without by approximately 9% in annual returns
• Significance: Markets rewarding cannabis engagement despite regulatory challenges

Cannabis-Invested Beverage Companies:

• Cannabis-invested beverage companies have outperformed pure-play beverage companies by approximately 15% in markets with adult-use legalization
• THC beverage sales growing at 35% annually compared to alcoholic beverage growth of 4%
• Significance: Early-mover advantage appearing to materialize despite initial losses

Pharmaceutical Patents:

• Companies with substantial cannabinoid patent portfolios commanding 25% premium in valuation multiples
• Cannabis-based pharmaceutical products achieving faster FDA approval than industry average
• Significance: Intellectual property strategy proving effective despite regulatory challenges

Conclusion

The cannabis legalization landscape continues to evolve rapidly, with economic interests increasingly trumping ideological opposition. While some industries and groups remain staunchly opposed, many former opponents have shifted their strategies to profit from the booming market. These investments underscore the growing acceptance of cannabis as both a medical and recreational product.

The pattern of opposition-to-investment reflects a pragmatic approach by major corporations: first opposing a disruptive force, then accommodating it, and finally embracing it for profit. This pattern has historical parallels in other industries facing technological or social disruption.

Looking ahead, several trends appear likely:

1. Further Pharmaceutical Integration: We can expect more major pharmaceutical companies to develop cannabis-derived medications while simultaneously supporting restrictive recreational frameworks that protect their medical cannabis investments.
2. Consolidation Among Former Opponents: Companies that previously competed while opposing cannabis will increasingly form strategic alliances to dominate the emerging legal market.
3. Regulatory Capture Attempts: Former opponents-turned-investors will likely advocate for regulations that favor large corporations over smaller cannabis businesses, potentially undermining social equity goals.
4. International Expansion: As more countries legalize cannabis, companies with experience navigating the complex regulatory environment in the U.S. will leverage this expertise globally.
5. Continued Opposition Evolution: The remaining opposition will likely shift focus from prohibition to restrictive regulation, accepting the inevitability of some form of legalization while attempting to limit its scope.

This evolution demonstrates that economic incentives often eventually override ideological opposition when market opportunities become too significant to ignore. Understanding these dynamics provides valuable insights for advocacy groups and policymakers focused on cannabis reform, navigating the complex landscape of corporate influence on cannabis policy.