Despite eight states and the District of Columbia already having legalized adult cannabis use in America, the advent of Attorney General Jeff Sessions eradication of the Cole Memorandum has sought only to exacerbate state-level grievances with Federal opposition. All across the nation, industry insiders and leaders have become more outspoken that the new directive for federal prosecutors will not hinder progress for the ever-growing industry. In fact, despite a small bump in the road, U.S. and Canadian cannabis stocks have shown aggressive re-growth after the announcement. By the end of day on Friday, United States cannabis stocks had recovered roughly 50% off the losses taken on as a result of Sessions declaration of a new war on drugs. Additionally, though the correlation across borders is not highly pronounced in this industry, Canadian stocks closed with record point highs in the same day.
This continued growth indicates strongly the attitudes of investors seeking to engage in the cannabis marketplace and their determination seems rival to or greater than A.G. Sessions himself. With a 22% drop in the United States Marijuana Index that Wednesday, and a 12% return by Friday’s close, it is unlikely that dramatic market shifts will take place. Unfortunately as world markets develop and our neighbor to the north capitalizes on global cannabis trade, he United States stagnates in growth. A lack of national legality and international precedent leaves the American cannabis market up 19% in 2017. While this may indeed appear to be sizeable market growth compared with traditional industries, for comparison the Canadian markets rose 153% in the same year. It is possible that the pressure from Sessions has actually promoted further accelerative growth for the Canadian markets. With investors seeking to take full advantage of the enormous potential legal cannabis offers, it is little surprise that restrictive growth locally will encourage international investments. The Canadian Index maintain over 110% growth for the past 30 days and roughly 320% growth over the past six months. Cam Battley, the executive vice president from well known Aurora Cannabis noted “We have to recognize that this (Sessions) is a good thing for leading producers such as Aurora because it is going to drive more investment and investors to leading Canadian companies, where their investments are safe in cannabis.” She further continued to state how the uneven platform in the U.S. may further exacerbate the “social problems of prohibition” and possibly result in a poorly distributed application of the law.
Alan Brochstein, the founder of a Houston-based cannabis advisory firm called 420 Investor, agreed with the point of Bettley that an uneven federal policy for cannabis regulation is far worse than mere strict enforcement. “How can businessmen an women proceed without knowing what the rules are? … That is the worst thing for investment.” The potential benefit for private investors with a high risk tolerance and ability to handle uncertainty is the withdrawal of upper echelon investors from much of the playing field. A lawyer with Green Light Law Group out of Oregon, Perry Salzhauer, stated “the announcement will put a further chill institutional investors who have been remaining on the sidelines thus far.” Many large corporations who have been considering entering the cannabis space in force may now take a simple “wait and see” stance until the implications of Sessions new memo become more readily apparent. Banks, hedge funds, and other large players who may have been privately keeping a close watch on the expanding cannabis market may now continue to look elsewhere or find a remote approach to benefiting from the legal markets.
Officials in state governments with medical and adult use programs were very quick to criticize the actions of A.G. Sessions with many initiating statements of legal action to be taken if necessary for the defense of their voted-instituted markets. Many citizens feel as though their voter rights have been infringed upon through these deliberate actions to combat state- level legislature. Analysts for cannabis growth continue to predict an expanded growth cycle as the industry recovers from the initial shock of the rescinded Cole Memo. It has been speculated that the uncertainty cause by this maneuver may even accelerate congressional level support and approval of a national cannabis program. “My hope right now is that this will actually push Congress to create some safeguards” stated Brochstein. Viridian Capital’s Scott Greiper, of New York noted that often “it takes a trigger like this to bring some rationality to the market.” One could perhaps even speculate that this was Trump’s intentions with Sessions and his loose leash with regard to cannabis legislation. The president rarely has made his thoughts known on the matter and it may be that such aggression by the Attorney General is intended to create political clout for Trump. With voter support for presidential actions in a state of mixed approval, an effort by the administration could garner the support necessary to hold a strong front with consideration for the next election. With the most recent Gallop poll placing support at a record high of 64%, political maneuvering by the president to aid the cannabis cause domestically and abroad would do tremendous overhaul on general approval ratings.
Regardless of the present regulatory environment, the topic of the hour is Vermont’s House Bill H.511 which passed earlier today. Allowing up to one ounce of marijuana and possession of some plants by those 21 and over, this landmark decision is the first time a legislative body has enacted cannabis legalization outside of a voter initiative. While not providing authorization for business licenses or commercial distribution, the bill nonetheless may herald the 9th state to approve the recreational use of cannabis. In effect, this structure will operate quite the same as the existing structure enacted in Washington D.C. The final step is for Governor Phil Scott to sign off on the legislation, of which he noted full support in December. Indeed he went so far as to say he would support a “Libertarian approach” to legalizing the personal possession of small amounts of marijuana. The Vermont Governor had backed a similar proposal in the spring of 2017 though procedural delays did not allow for its passing. Even still Scott says his position on the subject has not changed and it is fully expected that he will sign the bill into law. One must note how clearly such a bold and unprecedented move by state legislators will stand in the face of opposition from federal detractors. So soon after the Sessions decision, news of Vermont hastening the day towards national legalization gives hope and confidence to an industry in the face of questioned certainty. We must all now act in accordance with state policies and watch closely as matters continue to develop this year.