Smoke Signals Up North - What Jeff Sessions Ending U.S. Marijuana Protections Really Means
Uh oh, they have gone and done it. Is it time for the sky to start falling ...?
By Andrew Hard
On Thursday, Jan. 4, Attorney General Jeff Sessions rescinded the Obama-era policy that helped states legalize recreational and medical marijuana programs, raining on the parade of a fledgling industry during what should have been a celebratory week as California launched recreational sales on Jan. 1. (Read Sessions' full memo here.)
The Justice Department will rescind the so-called Cole and Ogden memos that protected cannabis entrepreneurs from federal prosecution and allowed the legal cannabis industry to flourish in states across the U.S. In a nutshell, that means U.S. attorneys in states where marijuana is legal will now be able to prosecute cases where they see fit. This will create more confusion about the overall legality of marijuana in states where it is legal, with businesses in each state not knowing whether they will be protected.
This is potentially a big $3.7 billion bummer for California and other legal cannabis markets ...or maybe not.
What does this mean for the industry as a whole? Based on reports in the news media so far, it seems like in states such as California and Colorado - that already have state licensing structures in place and a government that is supportive - business will proceed as usual. The real story may play out in less politically friendly states such as Arizona, Indiana and Iowa, who are still developing laws and have either state legislatures or officials that are less amenable to the cannabis markets in those states.
Several industry watchers may have mistakenly thought this new move by President Trump's anti-pot attorney general won't affect medical marijuana. As it currently stands, the Rohrabacher-Blumenauer amendment (also known as the Rohrabacher-Farr amendment), which protects medical marijuana patients, was only temporarily extended through Jan. 19. There is a huge risk that Republicans will take a stand and follow the DoJ, and fail to include renewing the amendment in the final budget package. At that point, no one is safe for certain.
Trump meanwhile, in a surprise to some, issued his "support" for the move, saying that he "does strongly agree that we need to enforce federal law."
A quick perusal of current US attorneys by district shows some bumps in that road that could be ahead even for somewhat established states like California, with the Cole memo repealed and cannabis-related legal matters in US Attorneys' hands. Several of those attorneys even in California have indeed been appointed by Sessions himself. So here we go.
Along with California, seven other states and the District of Columbia have legalized cannabis for adult recreational use. Twenty-one additional states have voted to allow marijuana to be used for medicinal purposes.
Sessions, a Republican from Alabama, has long been opposed to marijuana at an almost cartoonish level: equating it with heroin. However, this is the first action he has taken that deviates significantly from the Obama administration.
Look Up North, My Son!
Shares of publicly traded cannabis companies plunged as news of Sessions' policy change came out early Thursday morning, though some began to rebound after investors weighed the potential impact to an industry now so thoroughly established on the West Coast of the United States.
However, while the U.S. federal government continues to not get it when it comes to an industry expected to skyrocket from $6 billion in 2016 to $50 billion by 2026 in the U.S. (according to Cowen & Co.), many investors have said, "Look up North, eh?"
Investors looking to avoid the very certainly rocky thrill ride of the public company market in the US may just want to consider their progressive neighbor. As we know, much-admired Canadian Prime Minister Justin Trudeau has been an extremely outspoken advocate for the industry, standing behind his legal pledge to bring about full federal legalization in the country by July of 2018.
According to Bloomberg, Canadian pot stocks were booming on the heels of legalization in California on Jan. 1 - with some Canadian stocks surging up to an eye-bulging 55 percent. This lead to speculation of whether the major investment opportunity is all to be found up North as U.S. federal illegality looms. Now, some investors are looking at who might be the new upcoming "new kids on the block."
One company emerging into the spotlight lately is InMed Pharmaceuticals (OTC: IMLFF), which is researching therapeutics using novel cannabinoid compounds. Another possible upcoming unicorn may be Vancouver's Medipure Pharmaceuticals Inc., an incubator group working on a surprising array of cannabinoid-based therapeutics for afflictions including PTSD and anxiety disorders, dermatological conditions such as psoriasis and the big pharma Holy Grail so to speak: pain.
While many Canadian pot stocks and companies like Medipure don't technically tie into recreational market sales, there are multiple reasons that products produced by companies such as these will lead to more household-name products and revenue down the road - regulatory and FDA-approved products, that will be tested against the exact conditions they're targeted for.
So, keep your eye on these players. Canadian Prime Minister Justin Trudeau has vowed to reach full legalization of recreational adult use by July of this year -- and regional governments have said they will keep taxes on legal weed low to squeeze out the black market.
So, don't worry yet, eh? If the US federal government messes all of this up too badly - look North!