It has been one month after Attorney General Jeff Sessions officially rescinded The Cole Memo (which encouraged local governments to de-prioritize the use of funds to enforce cannabis prohibition under the Controlled Substances Act towards a more laissez-faire, hands-off approach) and the sky hasn’t fallen.
So, what does it really mean for the industry? There are a variety of opinions on this question, but my initial response to investors and financial backers is, “it’s not good but I wouldn’t panic”. Having had a few hours to assess the situation I am even less concerned than before.
Most in the industry and others who follow politics know that Sessions has been systematically repealing policy of previous administrations for several weeks now and the Cole Memo had been spared but was a likely candidate to follow suit. No real surprise here.
This effectively gives powers to the State Attorney General office holders (which they already had
before) to prosecute criminals who violate Federal Law. The Cole Memo was a policy, not a law and as such Attorney’s General was not required to follow it before.
Enforcement of federal crimes still requires funds and resources to implement. Those remain restricted under the Rohrabacher – Blumenauer bill, which is also in Jeopardy but has managed to stay alive in the tax bill and Government funding bill that currently is set to expire January 19. If this bill is not renewed it could be a bigger issue for the industry but still not fatal by any means. If the bill does get renewed the DOJ still has no funds to prosecute crimes.
The other element that is often overlooked is that in order for federal prosecutors to act they need a lot of cooperation from state and local governments, which are outwardly refusing to help in any way where it is legal. Even if the RB amendment does get repealed the funds to prosecute are still unlikely to get allocated anytime soon and once they are the meager resources will likely only fund a few small actions. Federal raids have continued during the last 3-4 years and have primarily been directed toward bad actors or those who are overly promotional about their practices. The industry understands the fine line between marketing and showboating. I hear about Federal raids all the time and none of them are businesses we would ever consider investing in.
Kevin Sabet of Smart Approaches to Marijuana was quick to point to institutional investors and warn them that staying away from marijuana is a prudent move. What Mr. Sabet fails to note is that the industry has been funded for the last 10 years without any real participation from institutional investors.
It is still an opportunity for the average investor to take advantage of the future or the maverick
institutional investor (Peter Theil, Scott’s Miracle Grow, and Constellation Brands) to secure large
long-term profits for their investors. Sabet’s actions and those of Sessions are only extending the
opportunity before the mass invasion of institutions come in and run up the prices.
Peter Theil said that “if you want to predict the future, find something inevitable.”
Marijuana is inevitable. The train has left the station and at times it will careen along at 100 miles an hour with the wind at its back, other times it will slow down for a street crossing or a track repair. Lawmakers have already begun threatening repercussions. One of Colorado’s Republican lawmakers, Senator Corey Gardner, has already said he will hold up all DOJ confirmations until Sessions relents. California having just gone recreational on Monday will create a sanctuary for legal businesses as will Washington, Oregon, and Nevada among others.
It is entirely possible that marijuana might be the first issue to bring Democrats and Republicans
together and the actions by Sessions might actually speed up legislation around marijuana laws in orderto remove the authority to act unilaterally from the Attorney General’s hands.
Regardless of the outcome the continued discussion around the topic of legalization only moves us
closer to what is ultimately inevitable so my advice to Sessions, keep pissing people off. In the end,
marijuana is more popular than Congress, than Trump and Hillary combined. Put that in your bong and smoke it Jeff!