How Will the U.S. Crackdown on Cannabis Impact Canada?
January 8th, 2018
Exclusive, News, Top News
The news of U.S. Attorney General Jeff Sessions’ repeal of the Cole Memo sent shockwaves through the legal cannabis industry in both the U.S. and Canada. While the immediate implications of the new memo remain unclear, many experts believe the Canadian market could receive a long-term boost. Canada has already become a global leader in the space due to its nationwide legalization of the drug and broad support.
Sessions Repeals the Cole Memo
The United States Attorney General Jeff Sessions issued a memo on January 4, 2017 that rescinded the Cole Memorandum – a 2013 policy that effectively offered the legal cannabis industry protection from federal prosecution. While Sessions is a well-known opponent of marijuana legalization, the move came as a surprise given the fact that marijuana legalization enjoys broad public support from across the political spectrum.
The response from politicians has been swift and decisive. Colorado Governor John Hickenlooper said the Sessions memo would not change his responsibility to carry out the will of the people, while Republican Senator Cory Gardner said he will be putting a hold on every nomination to the Justice Department until Sessions “lives up to the commitment that he made to me in my pre-confirmation meeting with him.”
The U.S. Attorney General for the District of Colorado even went so far as to suggest that the office will not make any changes to how its addressing the cannabis industry.
Unfortunately, the move could open the door for federal prosecutors to target the cannabis industry as they see fit. Before the Cole Memo was in place, it wasn’t rare for federal law enforcement to crack down on businesses that were doing nothing wrong at the state level. This means that U.S. cannabis businesses could have even more difficulty with things like banking access, while consumers are unsure of what is legal and what is illegal.
How the Move Will Impact Canada
Delta 9 Cannabis Inc. (TSX-V: NINE) CEO John Arbuthnot recently pointed out the Sessions memo has impacted cannabis stocks in both the U.S. and Canada, but says the long-term implications are positive for Canadian companies. While the company takes no position on the U.S. government’s decision, Mr. Arbuthnot feels that it will hurt the U.S. industry and will help the Canadian industry in terms of attracting investment and growing an international footprint.
“Canada is already, without question, the global leader in the cannabis industry, and this is due largely to our own federal government’s support of sensible legalization policy,” he told Forbes Magazine. “That support is allowing companies to expand both in Canada and now throughout the world, whereas American companies are being held back. There is a real fear about investing in U.S.-based cannabis companies at a time when it is possible for people connected with those companies to be prosecuted under federal drug laws.”
Like many other cannabis companies in Canada, Delta 9 Cannabis has undertaken a massive expansion of its production facility in Winnipeg, Manitoba. The company also submitted a proposal on December 22 to open a chain of retail cannabis stores in Manitoba in response to the provincial government’s request for proposals. The move could help it become a regional leader in the province as the country continues to expand the industry.
Delta 9 Cannabis Inc. (TSX-V: NINE) represents one of those compelling opportunities within the Canadian cannabis industry. Unlike the US, where hundreds of companies compete in every state where cannabis is legal, fewer than 80 companies are licensed to cultivate marijuana in all of Canada, and even fewer are currently licensed to sell the product.
Of those companies, Delta 9 was the fourth company licensed in Canada, and is the only company licensed to both grow and sell cannabis in the Province of Manitoba. In fact, Delta 9 currently sells more cannabis in Manitoba than all other cannabis companies combined.
Delta 9 closed a $23 million ‘bought deal’ in December that adds to the $9 million it raised earlier in 2017. The company is now fully funded to expand to $75 million in revenue annually, and has also signed a joint marketing agreement with Canopy Growth to work jointly in both the Manitoba and national markets.
While the U.S. market faces growing uncertainty, Arbuthnot believes the Canadian market could benefit from the policy uncertainty over the long-term. “We already see a lot of investor interest from the United States and globally,” he says. “I think that will increase greatly due to the reversal of policy on the Cole Memo. People want to invest in what is now the fastest growing industry in the world, and if they can’t invest in the US, they will look to invest in the stable and well regulated industry that is Canada.”
For more information, visit the company’s website at https://www.delta9.ca/
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