The Global Implications of Jeff Session’s Decision to Revoke the Cole Memo
January 17th, 2018
While the announcement quickly got lost in the first week of the year amid all the other “fire and fury” of the new Trump book expose, the cannabis industry finally got formal notification of an equally alarming move at the Department of Justice that most expected much sooner.
Jeff Sessions has (unsurprisingly) announced that he is revoking the Cole Memorandum. The move came three days after the largest state market in the country, otherwise known as California moved forward formally on implementing legal recreational use and one year after Session’s confirmation hearings for Attorney General. Not to mention 9 years after Obama entered office and not only refused to move forward on the issue federally, but appointed the now disgraced, former Bush appointed Michelle Leonhart to head up the DEA.
Remember 2014? Even though constitutionally perhaps, it does seem like yonks ago.
The good news? Yes, there are 8 U.S. states with recreational laws. But this is far from the big picture, and increasingly, it matters less what U.S. states do in comparison with whole countries now authorizing not only domestic use for both medical and recreational purposes, but worldwide export.
The cannabis genie is out of the bottle globally. What happens in California, in other words (along with Nevada and the other 6 recreational states), is actually less important on a global stage than it used to be (although the news about the Cole Memo shook international cannabis company stock prices temporarily).
Sessions, in fact, is just setting the stage, sadly, for American cannabis firms to fall further behind in global business development as well as export in the vertical. The rest of the world is moving forward – and on both the recreational and medical front. And in turn, that conversation will continue to drive pressure for federal reform domestically in the U.S.
In Canada, of course, the market is not unaffected by this news. Crackdowns in the U.S. will impact Canadian growers to the extent that they too have entered the U.S. market (and many have through creative partnerships with state-based entities and facilities). Despite a temporary plunge in stock prices of the biggest companies in the first week of January after the news broke, however, this will not last long. Particularly for those firms which have never been exclusively or even mainly focussed on the U.S. market (at least for now) but rather have set their sights set for expansion abroad in other hemispheres. Remember, federal recreational reform starts this summer. No matter what state-based federal prosecutors or the Justice Department in the U.S. do.
Also remember it is more likely that federal prosecutors will target smaller firms, not the bigger, multi-state or cross-border initiatives. At least not at first.
There are a few more reasons why this move comes at an interesting time for Euro cannabis. And not just because it gives Europeans (and in particular Germans) another chance to laugh at Trump.
In Germany, things are still at a holiday standstill, but the lull from this market and the rest of Europe is only temporary. A federal German court is still in the process of listening to evidence over the discussion of who should qualify to cultivate medical cannabis domestically. However that logjam is expected to clear by February. By that time conveniently, it is also expected that the current political deadlock in general here will also come to an end. Look for greater cannabis reform to also be a top agenda item that will move forward, no matter what, after April at the very latest. Canadian and other foreign firms are also likely to be in the mix as well as domestically helmed and financed efforts. Politically, there is no chance that Germany will just outsource its canna-expertise to foreign firms forever. In the short term, it is very likely that a couple of Canadian firms, along with, potentially Australian contenders and potentially even a German firm or two, will end up growing bulk medical crops for a German patient community which is only gearing up this year for more activism.
Just in case anyone missed it, the land Down Under is now following Israel and Canada’s footsteps. Not only is the country ramping up for domestic medical cultivation, but looking at international markets now that their government has approved global exports. This is expected to go into effect after February of this year.
And while the Session’s decision will absolutely affect the interest if not actual import of Aussie product into the U.S., the worst that will happen is a slowdown of the inevitable.
Don’t forget about the impact of Israel on the entire discussion. In fact, it might be that politically, Israeli firms who are exporting tech, knowhow, patents and seeds, might be able to dovetail their export plans into the evolving U.S. state market. Along with just about everywhere else. The Start-up Nation is well ahead of the rest of the planet on this front, and if they are well-funded enough to be in the United States in the first place, they are unlikely to be on the front of any politically motivated federal prosecution on cannabis.
High Political Risk & Stigma
It has been very clear that the American federal government has been trying to find ways to undercut the political clout of the domestic U.S. cannabis industry as it has developed so far. Not to mention after Trump entered the White House. See the closing of the Marijuana Policy Project’s bank account last year.
With the Cole Memo now officially rescinded, no matter what federal prosecutors say now, this risk becomes even greater with the passage of time and no corresponding congressional action. And while it is clearly smaller businesses (in states like California and Nevada in particular) who are likely to feel the brunt of this, the risks are undoubtedly just that much higher for everyone. Including those trying to enter the U.S. state market from abroad.
However in the space that the early legalizing states created, an international market has been born – and one that is far, far from the reaches of American courts, a politicized Justice Department, and legally sanctioned by other federal sovereign governments.
The biggest impact of this discussion from a cannabis industry only perspective is that it might, finally put steel in the backs of federal legislators across the United States to (at minimum) finally reschedule the drug.
Everyone else is.
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