The Green Rush? Canadian Cannabis Companies Investing Millions in America’s Future Legal Marijuana Industry
With the Democratic Party now in charge of the House of Representatives, United States Senate, and the White House, the federal government’s arcane attitude toward marijuana is likely to face long overdue reformation.
The Drug Enforcement Agency currently classifies pot as a Schedule I narcotic.
In December, the House passed The Marijuana Opportunity Reinvestment and Expungement (MORE) Act, which “removes marijuana from the list of scheduled substances under the Controlled Substances Act and eliminates criminal penalties for an individual who manufactures, distributes, or possesses marijuana.”
While green is big business in states that have authorized personal recreational use of the plant, private growing and retail enterprises face challenges unique to their legally nebulous industry.
For example, federal law prohibits banks from participating in transactions involving controlled substances. That puts state-level operations in a precarious position, often resulting in cash-only sales. This not only limits profitability, it robs municipal coffers of revenues generated through sales taxes.
Nevertheless, cannabis stock prices have soared in the weeks since the 2020 election – all predicated on the prevailing belief that marijuana will eventually be legal in all 50 states.
On Thursday, Politico reported that Curaleaf, the largest cannabis company in the country, “put over 16 million shares on the market overnight and brought in $300 million — in equity and debt sales — in under 24 hours,” betting on increasing odds that a progressive Congress will enact regulatory upgrades that would remove the ridiculous barriers imposed on commercial marijuana.
The company’s payday foreshadows how the entire cannabis industry is poised for growth and consolidation as Democrats take full control of the federal government. Companies are positioning themselves for the greater likelihood that federal cannabis restrictions will be loosened significantly.
Sales are already booming. Cannabis sales hit $20 billion last year — a 50 percent jump over 2019. Legalization continues to spread across the country, with more than one-third of Americans now living in states where marijuana is fully legal.
Because the Democratic majorities are slight, “many in the weed industry have their sights set on banking legislation in the new Congress. The SAFE Banking Act — which would make it easier for banks to offer financial services to the cannabis industry — passed the House with broad bipartisan support in 2019, but went nowhere in the GOP-controlled Senate,” Politico noted.
Meanwhile, in Canada, where weed is legal, companies are chomping at the bit to get in on the American action.
In May of 2020, Constellation Brands, Inc. (“Constellation Brands”) (NYSE: STZ) and (NYSE: STZ.B), a beverage company, purchased $245 million in shares in Canopy Growth Corporation (“Canopy Growth”) (TSX: WEED) (NYSE: CGC), a cannabis conglomerate.
Canopy Growth has also “announced a deal — contingent on U.S. legalization — to acquire a big stake in TerrAscend, which has operations in California, Pennsylvania and New Jersey,” wrote Politico.