In recent years, the United States has been a breeding ground for rapid marijuana sales growth. According to Marijuana Business Daily's report, "Marijuana Business Factbook 2017," U.S. sales were forecast to grow by an estimated 30% in 2017, 45% in 2018, and by an aggregate of 300% to approximately $17 billion annually between 2016 and 2021.
Consumer opinion has been a major reason for the rapid rise in cannabis sales. Just over two decades ago, Gallup found that just a quarter of the population favored the idea of legalizing recreational pot. By October 2017, favorability had catapulted to nearly two out of three Americans, representing an all-time high over a nearly five-decade stretch of polling.
Image source: Getty Images.
The cannabis industry's ceiling is limited in the U.S. by its scheduling
Yet, in spite of this rapid sales growth, the steady increase in favorability among the public, and the 29 states that legalized marijuana in some capacity, the ceiling for the U.S. pot industry is quite low. The reason? Look no further than restrictive federal laws.
Whereas medicinal marijuana is legal in Canada, Mexico, and a growing number of countries throughout the world, it remains entirely illegal in the United States. As a schedule I substance, marijuana is put on par with heroin and LSD, is viewed as being highly prone to abuse, and isn't recognized as having any medical benefits.
This schedule I classification makes life very difficult for cannabis companies and medical weed patients alike. Pot-based companies often have very minimal access to basic banking services, with many struggling just to open a checking account. Similarly, they can pay an effective tax rate of up to 90%, if profitable, due to tax code 280E disallowing businesses that sell a federally illegal substance from taking normal corporate income-tax deductions.
Meanwhile, patients suffer due to the copious amounts of red tape surrounding clinical studies involving medical marijuana. There's just one approved grow facility in the U.S. – the University of Mississippi – which makes it difficult for researchers to conduct the studies congressional lawmakers would require before reconsidering weed's scheduling.
Jeff Sessions addressing an audience. Image source: Jeff Sessions' Senate webpage.
Jeff Sessions: Enemy No. 1 of the marijuana industry?
Truth be told, there are a laundry list of reasons why investing in marijuana in the U.S. is a downright sadistic idea, beyond just the business disadvantages described above. But one stands out from the rest. Namely, I'm talking about Attorney General Jeff Sessions.
It's no secret that Sessions isn't a supporter of marijuana's expansion – not even in the teensiest of ways. He's railed against the drug before by claiming that "no good people smoke marijuana," and has completely debunked the idea that the opioid crisis can be fought by prescribing or legalizing cannabis instead of opioids to treat pain. But his actions speak even louder than his words.
Last year, Sessions sent a letter to a handful of his congressional colleagues requesting that the Rohrabacher-Farr Amendment (also known as Rohrabacher-Blumenauer) be repealed. This amendment is included with each federal spending bill and, if passed, disallows the Justice Department from using federal dollars to prosecute medical marijuana businesses operating in states that legalized medical weed. Though Sessions has been unsuccessful in his efforts to remove this amendment, his intentions are clear.
More recently, on Jan. 4, 2018, Sessions announced that he'd be rescinding the Cole memo. This memo, crafted by former Deputy Attorney General James Cole in August 2013, outlines a series of loose "rules" that states would abide by in order to keep the federal government off their backs. Examples include keeping grown cannabis within a state's borders and ensuring that adolescents are kept away from accessing marijuana. The removal of this memo opens the door for state-level prosecutors to bring marijuana charges against businesses or people, even in legalized states, with discretion.
Image source: President Donald J. Trump's official Facebook page. Photo by Shealah Craighead.
President Trump may be reversing his stance on medical marijuana
Yet, for as anti-cannabis as Sessions has been, the industry has continued to expand nonetheless. President Trump, though, can exert far more power and influence than Jeff Sessions, and in recent weeks he's demonstrated that he, not Sessions, may be the biggest enemy of the pot industry.
During his campaign, Donald Trump came across as a general supporter of cannabis, or at the very least someone who was intrigued about learning more. He was quoted as saying he was "100 percent" behind the idea of legalizing medical marijuana and suggested that he'd need to look into recreational cannabis more before leaning one way or another. While that may not be the overwhelming support legalization enthusiasts wanted to hear, it looked as if America was getting its first cannabis-progressive president.However, those promises of support for medical cannabis have been for naught.
To begin with, Trump was the person who nominated Sessions to be attorney general, knowing full well that he'd been an ardent opponent of expansion during his time in the Senate.
Even more telling is what's happened of late with Israel's ambitions of launching a medical marijuana export industry. Israel, which legalized medical cannabis in the 1990s, is looking for new ways to generate revenue, with an Israeli government report suggesting that exporting cannabis would bring in between $285 million and $1.14 billion a year. The U.S. was deemed as Israel's prime export destination.
Image source: Getty Images.
Unfortunately for Israel, those plans have been put on hold. The Times of Israel reported earlier this month that Israeli Prime Minister Benjamin Netanyahu halted plans to export medical cannabis to the U.S. as a means to placate President Trump, who has viewed the expansion of the U.S. cannabis industry with disdain. If Trump truly supported the domestic medical cannabis industry, it would seem logical he would support the importation of medical weed from an ally. Netanyahu's comments suggest the possibility that Trump's beliefs on pot may more closely align with Jeff Sessions than anyone realizes.
As much as legalization enthusiasts wanted to believe Trump's medical cannabis ambitions, it's looking more likely that he's actually an opponent, not a proponent, of marijuana. That should raise red flags for anyone thinking of investing in U.S. marijuana stocks.
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