Is the cannabis winter coming to an end?

the MORE Act

By Marc Brandl

[Note: A version of this article originally appeared in 8th Revolution’s Monthly Playbook – subscribe here]

Recently two prominent investors analyzed cannabis equites saying the sector was like ‘walking the graveyard at midnight looking for shallow graves’ and riffed that cannabis stocks might be similarly positioned to Bitcoin in 2019.  Joe Biden’s pardons and request for a scheduling review have revived what has often felt and looked like a corpse in equities markets the past two years.  Talk of a congressional lame-duck session post-midterms where passage of ‘SAFE Banking Plus’ is on the table by Sen. Cory Booker (D-NJ) and others have also breathed some life back into the industry.

But is this enough?

Joe Biden’s pardon of some federal marijuana convictions is a welcome and long overdue move but does little for the industry right now.  The more important move is his calling for executive branch review of scheduling of cannabis.

 

The scheduling review will take some time, potentially years, and the results are not guaranteed or necessarily positive for operators.  Moving cannabis to Schedule III for example, putting it on par with ketamine and codeine, might disempower current operators and bring in pharmaceutical companies to take over a large segment of the market.  De-scheduling cannabis and removing it from the Controlled Substance Act would be the best possible outcome of the review.  This would essentially place cannabis policy in the hands of individual states and create another period where the FDA and likely Congress weigh in on federal regulations of cannabis for medical and recreational use.  This would be like FDA’s ongoing multi-year review of CBD’s health effects.   De-scheduling is unlikely as DEA will be intimately involved in the scheduling review and who have stated their opposition to outright legalization of cannabis. In general, federal agencies are not prone to seceding regulatory powers without Congressional mandates via legislation.

And there lies the rub.  The cannabis industry is reliant upon political and regulatory solutions to their business problems.  We’ve witnessed wave after wave of political progress at the state and local level since California first legalized medical cannabis in 1996.  The November 2022 mid-term elections will certainly bring more progress on the state and local level with three of six states very likely to pass recreational cannabis ballot initiatives.

Rhetoric around cannabis has also changed drastically in Washington, DC since the 90s.  Politicians are daily falling over themselves tweeting their support for legalizing cannabis and ending the war on drugs but concrete policy changes are hard to point to. The best the industry has received from Congress and the Executive branch is tolerance, often given grudgingly.

Rumors and speculation abound on social media that the Biden administration will take more progressive moves in cannabis reform after the mid-term elections as set up to the 2024 Presidential elections.  Campaign promises about cannabis and overall criminal justice reform from the 2020 race have so far gone largely unfulfilled.  As a US Senator since 1974 President Biden has been the progenitor and cheerleader for some of the most regressive and ugly pieces of criminal justice legislation we’ve ever seen: the 2003 RAVE Act, mandatory minimum sentences and the 1994 Violent Crime Control and Law Enforcement Act are just three of the major lowlights.  Pinning our hopes on President Biden and his administration to be the savior of the cannabis industry is not warranted if history is anything to go by.

More time in the graveyard where the only people paying attention are cannabis industry operators, insiders and investors seeking out if ‘the bottom is in’ may still be the story for the near future.  On the upside the US cannabis market continues to grow and smart companies continue to build great businesses and great future brands.  That the future of the US and global cannabis is bright is a given.  The only question as is often the case is timing.

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