Let’s face it. America’s cannabis industry is tenuous, at best. Thanks to Attorney Jeff Sessions, the revocation of the Cole Memo leaves states at the will of their State District Attorney’s, instead of being protected by federal guidance. The Cole Memo protected the recreational cannabis industry from federal interference. Now that it has been revoked, uncertainty has spread across the United States.
In addition to the Cole Memo, the fate of the Rohrabacher-Blumenauer amendment was in the balance, or rather unbalance, of Congress. When members of the Senate and House of Representatives were unable to come to an agreement on a budget, the federal government shut down, leaving entrepreneurs on the edge of their seats.
However, even with all of the uncertainty swirling around the federal government, investors are still diving deep and funneling hundreds of millions of dollars into the cannabis industry, expecting exponential growth.
There seems to be one senator that is in agreement for the legalization of marijuana. Senator Rand Paul proposed two budget amendments to the House spending bill that allows for expanding the protection of state-legal cannabis. Marijuana Moment reported that Paul has proposed two different measures which include:
- Defund any attempts by the Justice Department to interfere with either state-legal medical or recreational cannabis
- Prevention of the DOJ from prosecuting banks that serve state-legal cannabis companies
Even with Sessions’ self-proclaimed war on marijuana, companies like Seattle-based private equity firm Privateer Holdings are still investing in the country’s legal marijuana industry. Privateer Holdings recently set a new record by investing $100 million into a round of cannabis-focused funding. Companies such as Tilray, Privateer, and Leafly are forging ahead, even with threats from Sessions. According to Privateer CEO Brendan Kennedy, “We closed a number of investors in the last two weeks. The memo didn’t change anything for us.”
This is good news for the U.S. cannabis industry. However, those who lack confidence in the capacity to survive the multitude of threats, federal prohibition continues to throw up heavy amounts of roadblocks, cutting off legal cannabis’ access to both the American stock markets and proper banking industries. Instead of choosing another industry to back, investors are now looking to Canada, where cannabis will become fully legal by the end of 2018. Canadas stock market will welcome the new industry, just like any other commodity.
Although Kennedy is not scared by Sessions’ actions, he is concerned about the “ability of companies inside the United States to lead this industry globally.”
Privateer is always on the lookout for global opportunities. Outside the U.S., there is less risk and more certainty in opportunities. Kennedy stated, “They’re easier to scale, and we have the ability to partner with real companies – such as pharmaceutical distributors – that we wouldn’t be able to partner with in the U.S.”
The Canadian Security Exchange
With most of the investment opportunities happening outside the United States, company CEOs such as Kennedy see the Canadian Security Exchange (CSE) rising above the NASDAQ or the New York Stock Exchange (NYSE) in the cannabis industry.
“We raised this capital from investors around the United States and around the world, and frankly, we’ll deploy the vast majority of this capital outside the United States,” Kennedy said. “Most of the investment opportunities we’re looking at today are outside the U.S., where the pace of change in many ways seems to be happening at an even faster rate than inside the U.S.”
CNBC reported that U.S. based cannabis company, MedMen, plans to go public on the CSE rather than the NASDAQ or NYSE. With a plethora of dispensaries in California and New York, it is a disappointment to those who want to invest in the U.S. stock market.
CEO Adam Bierman recently told CNBC that there is a brewing excitement around the national legalization coming to Canada this year. He also stated that with the hungry appetite among global investors, the Canadian public markets are luring these investors with the speed of their legalization and ability to invest in the CSE.
He also eluded to an explosive U.S. market, if and when the cannabis industry is allowed to trade on the NASDAQ or NYSE.
“…there is this appetite among global investors to invest in a U.S. play. Specifically, global investors want to invest in a U.S. play that has California exposure. Now is the time where it makes the most sense.”
The Toronto Stock Exchange (TSX) is Canada’s largest stock exchange with over $20 billion in Canadian-based cannabis capital. However, American-based cannabis companies are also represented, compiling over $230 million in capital.
Entrepreneurs and investors are flooding Canada’s cannabis markets due to the current up-and-running international cannabis distribution network. There is also the flourishing local market set to grow even more after legal recreational sales begin later this year.
Canadian Marijuana Prices Drop
Statistics Canada released a report that claims nearly 5 million Canadian cannabis users spent almost $4 billion on marijuana in 2017. This number includes legal and illegal sales. However, experts predict that the illegal marijuana sales market will shrink considerably in the years to come. A cultivation boom has meant that the retail price of marijuana has decreased significantly. The average price of a gram of marijuana in Canada has dropped $1.00 (CAD) in the last year.
Even with the price drop, industry experts predict that there will still be a hefty profit to be made in Canada. As production grows and consumer spending increases by 6% per user per year, the future of Canada’s cannabis industry looks profitable for investors.
Investors in the U.S. are looking for changes in federal cannabis laws that will ultimately allow for the fledgling cannabis market in the U.S. to grow to its full potential. There is a great opportunity for investors to make enormous profits, but only if the federal government gets out of the way and finally removes all barriers to funding the cannabis industry. However, with Sessions’ recent actions, it does not appear that it will be soon.