James Lee voted for Donald Trump in November and even attended Trump’s inauguration in January. Now, he’s scrambling to save a business venture two years in the making, one which a new Trump policy on marijuana could snuff out overnight.
Trump’s press secretary, Sean Spicer, alarmed the burgeoning legal-marijuana industry on February 23, when he said the Trump administration might practice “greater enforcement” of federal drug laws than the Obama administration had. Federal law bans the use of marijuana, even though eight states and the District of Columbia have declared pot legal for recreational use. Federal law trumps state law, but Obama said in 2012 that the US government had “bigger fish to fry” and essentially wouldn’t enforce the federal law. That led to a surge of investment in marijuana, which is now an $8 billion business in those states.
If Trump begins to enforce the federal ban on marijuana, however, it’s likely to choke the whole industry—with Lee one of the first likely victims. “In the business, people are freaking out,” Lee tells Yahoo Finance. “A lot of us were huge Trump supporters, and still are. But people are running scared, and deals are falling apart. That comment [about greater enforcement] is in direct contradiction to the America-first principle he’s talking about.”
A business-to-business ‘cannabis cruise’
Lee, 35, runs a consulting firm in Chesapeake, Virginia, called Skill Stix that has been working for two years to sponsor a “cannabis cruise” from Miami to Jamaica that would be a business-to-business networking event for companies hoping to cash in on legal marijuana. Lee wants to connect the small businesses that have popped up in legal states such as Colorado and Washington with the big companies that might want to invest in them, sell them equipment or buy their products.
Some marijuana growers modify John Deere combines for harvesting their crop, for instance, and might want to learn more about Deere’s product line. Whole Foods sells non-psychoactive hemp products, similar to the drug form of marijuana, that are sourced from overseas—since it’s still against federal law to grow it here. But the upscale grocer might want to find domestic growers if US law were to change. The founders of Ben & Jerry’s ice cream have said they’d be open to weed-infused ice cream if the drug becomes legal. Many other companies would doubtless jump in if full legalization opened up new avenues of profitability.
Unlike small pot businesses operating in weed-friendly states, big companies are generally waiting for marijuana to become legal nationwide before getting involved. Trump said in 2015 he thinks pot should be handled on a state-by-state basis, leading to hope in the industry that he’d follow Obama’s hands-off approach and maybe even make the federal ban one of the “job-killing regulations” he’d repeal. At the start of this year, Marijuana Business Daily surveyed industry leaders and reported an upbeat outlook for the pot business in the Trump era.
Lee’s cannabis cruise, scheduled for October, was supposed to be a weeklong opportunity for big and small businesses to get to know each other and find new ways to make deals, either in the present or when the political risk of investing in marijuana recedes further. No pot would be allowed on the ship, either at sea or in port. But pot would available when cruisers disembark in Jamaica, for anybody interested. Other cruise activities were to include seminars on every aspect of the weed business, from “seed to sale:” seed engineering, financing, branding, packaging. There was also to be a charity auction of a well-known piece of “functional glass art”—aka, a bong—likely to raise $250,000 or more. The proceeds would go to Mike Rowe’s foundation, which helps American workers develop new skills. The cost of the cruise would be around $1,500 per person.
‘This is a 100% American worker industry’
When Lee started seeking a cruise line willing to run the trip, he found most were reluctant to be associated with the cannabis industry—even though polls show 60% of Americans now support legalized marijuana. But one line, Norwegian, considered the idea, and Lee, backed by some private investors, negotiated a proposed contract that would require a $7.1 million upfront payment—due in early March. He’s now agonizing over whether to make that payment and bear the risk that Trump further discourages investment in the industry, leaving him with an empty ship and a big loss—or pull the plug on two years’ worth of work. Norwegian points out that the deal isn’t yet final and reiterates that it has a “zero-tolerance policy” for illegal substances on all its vessels.
“I’m terrified that if I put this money up, what happens when the DEA comes out and starts raiding shops and everybody runs from the entire industry,” Lee says. Federal law might even give the government cause to declare the bong that’s up for auction as drug paraphernalia, which would give the feds the right to seize the entire ship. Norwegian, for its part, is tightening the rules and growing more concerned as well.
Ironically, Lee sees the marijuana industry as a Trumpian opportunity. “This is a 100% American worker industry,” he says. “One of the big benefits of this is taking the money away from the [drug] cartels.” He also points out that taxing marijuana as a legal product provides needed revenue for state and local governments—and potentially for Washington if Trump were to legalize pot. “Trump wants to pay for a wall? Let the cannabis industry pay for the wall,” he says. The Tax Foundation estimates that marijuana, if fully legalized, could generate $7 billion per year in federal revenue and another $21 billion for states and cities.
There’s at least one key person in the Trump administration who sees it quite differently: Attorney General Jeff Sessions, who has long been opposed to the legalization of marijuana. During his confirmation hearing in January, Sessions was cagey about what he might do about states that flout federal law by declaring pot legal. “I won’t commit to never enforcing federal law,” he said, indicating he might reverse Obama’s de facto tolerance of legal weed.
Weed aficionados hoped Trump would extend his pro-business policies to their part of the economy. “In the industry, we knew Sessions was bad, personally, but figured Trump would kind of overrule him,” Lee says. Instead, Sessions seems to have persuaded his boss to take a harder line on pot, at least for the time being. Several pundits have pointed out that Sessions and Trump cited states’ rights when overturning the Obama law on transgender bathroom use, while seemingly asserting federal authority over states on legal marijuana.
Lee, meanwhile, must decide whether to commit $7 million to the deal with Norwegian by March 3 or give up and wait to see if Trump decides to include marijuana on his list of America-first products. “We’re trying to facilitate expansion of this industry and bring business solutions,” Lee says. “This is a globally significant industry that America stands on the brink to lead.” Trump himself could have said that.
Confidential tip line: email@example.com
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman