U.S. Attorney General Jeff Sessions Thursday rescinded Obama-era legislation that prevented the federal government from interfering with state laws around marijuana, but it will be difficult for his actions to make a real impact, Canaccord Genuity analyst Matt Bottomley says.
In a research report to clients Thursday, Bottomley addressed several reports that Sessions was would limit or terminate the “Cole Memo”, a piece of legislation issued by Deputy Attorney General James Cole that outlined strict non-intervention criteria for the feds in legal cannabis markets. The development comes just days after the country’s most populous state, California, legalized marijuana.
Many in the U.S. spoke out against the move, including Democratic Senator Ron Wyden.
“Trump promised to let states set their own marijuana policies. Now he’s breaking that promise so Jeff Sessions can pursue his extremist anti-marijuana crusade,” Wyden said in statement Thursday. “Once again the Trump administration is doubling down on protecting states’ rights only when they believe the state is right.”
Bottomley notes that medical marijuana markets already implemented in 29 states are still protected by existing legislation under the “Rohrabacher–Farr” amendment, so Sessions’ actions are limited to the recreational markets. Even then, the analyst argues, there are significant hurdles the government would need to overcome to implement federal enforcement. Bottomley say the winds are clearly at the back of legalization, despite today’s actions.
“Independent of Sessions’ plans, we believe there are still several mitigating factors at play, including: (1) over 60% of Americans support the legalization of cannabis, with bipartisan support in many US states; (2) sales from legalized markets bring in hundreds of millions of dollars in taxes annually. California’s recreational marijuana is estimated to provide the state with >$1 billion in funds once fully implemented; and (3) there are a number of bills currently in Congress that call for the protection of legalized rec markets in the US, in order eliminate crime and protect youth (including a bill introduced by Senator Corey Booker calling for the removal of marijuana from the federal Controlled Substances Act altogether),” the analyst said.
Bottomley says the overall impact of this development is that “headline risk” could spook investors in the space.
“We expect this to weigh on stocks of US cannabis companies and could hamper liquidity and new investment until further clarity is provided,” he adds.