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Illustration: Lazaro Gamio/Axios

The biggest unclaimed territory in the consumer discretionary universe is cannabis. Even though cannabis remains illegal under federal law, Americans spent $6 billion in 2017 on legal recreational and medical marijuana.

Why it matters: Americans may have spent a total of $50 billion on recreational cannabis last year, according to the best estimates. That leaves enormous room for the legal market to grow, even if cannabis consumption remains flat.

Early investments in growing cannabis have not necessarily paid off, with the price of "outdoor flower" plunging from about $3,000 per pound four years ago to as low as $250 per pound today, according to Drake Sutton-Shearer, the CEO of cannabis media shop Prøhbtd. Thanks to falling prices, marijuana sales in Colorado dispensaries actually fell in May 2018, compared to a year earlier.

  • The industry remains a legal minefield, with regulators involved at multiple levels from municipalities up to states and even the federal government. Opening a bank account for a cannabis business can be incredibly difficult; suing for trademark infringement in another state can be downright impossible.
  • The industry is also extremely fragmented, with more than 75,000 companies in the U.S. and Canada alone. There are zero national brands, very little brand recognition even at the state level, and dozens if not hundreds of competing retailers and distributors in every jurisdiction.
  • Many of the most successful entrepreneurs are working in ancillary areas, like vape-pen manufacturing, brand-consultancy services or conference organizing. (There were 172 business-to-business cannabis conferences last year.)

A lot of people, including stock-market speculators, assume that a legalized and branded future awaits, just as with coffee, alcohol, tobacco and pharmaceuticals. But even if that's true, no one has a clue who the ultimate winners might be. (Remember that Juul came from nowhere to dominate the tobacco vape space.)

  • As a psychoactive substance, the effects of marijuana can vary wildly, and consistency of experience is much more important for cannabis brands than it is for, say, alcohol brands. It's also much more difficult to ensure, across states and geographies.

The bottom line: Hundreds of billions of dollars are currently spent on alcohol, tobacco, opioids and pharmaceuticals that treat pain or stress. Legal cannabis could, theoretically, capture a significant part of that market. But picking winners is hard. And full legalization is hardly a foregone conclusion. Expect extremely strong opposition before that happens.

Go deeper

SEC debunks conspiracy theories about meme stock mania

Photo: Alessia Pierdomenico/Bloomberg via Getty Images

The SEC issued its long-awaited report on the meme stock mania, which downplayed the narrative that a "short squeeze" was the primary driver behind GameStop's historic stock moves — and shot down conspiracy theories about the event.

Why it matters: The postmortem was highly anticipated, largely because of what it could hint about what the regulator thinks should be done in wake of the saga. But the report stopped short of specific policy recommendations.

Breaking Biden's diplomatic logjam

Expand chart
Data: Center for Presidential Transition via Congress.gov; Chart: Will Chase/Axios

The logjam for reviewing and confirming President Biden's ambassadorial picks is finally starting to break.

Why it matters: Biden is far behind his predecessors in the rate at which his ambassadorial picks have been confirmed. The Senate Foreign Relations Committee will hold a series of high-profile hearings and votes this week to finally begin chipping away at the backlog.

1 hour ago - Politics & Policy

Democrats brace for staredown over paid family medical leave

House Ways and Means Committee Chairman Richard Neal. Photo: Win McNamee/Getty Images

Senior House Democrats are braced for battle with the Senate over whether paid family medical leave — a key priority for progressives — will be included in President Biden’s final budget reconciliation bill, lawmakers and aides tell Axios.

Why it matters: Sen. Joe Manchin (D-W.Va.) has indicated he wants to cut the program to reduce the bill's price tag. “Paid family and medical leave must be in the final package,” Rep. Richard Neal (D-Mass.), chairman of the House Ways and Means Committee, told Axios on Monday.