Fed’s rejection of Senate amendments is good for the pot business, GMP says

Canada’s legalization of recreational pot took another step towards becoming a reality when the federal government responded yesterday to amendments proposed by the Senate to the so-called Cannabis Act, Bill C-45.

But along with accepting a couple dozen changes, the government rejected a few key amendments, including one affirming province’s rights to ban home cultivation.

And while the legislative to-and-fro continues, sector analyst Martin Landry of GMP Securities says that the government’s response represents a positive move towards establishing a regulated marijuana industry in Canada.

Among the federal government’s rejected amendments were the following:

1. A proposal to ban promotional activities and branding related to cannabis products,
2. A proposal to establish a public registry of all cannabis companies’ directors, parent corporations members and shareholders,
3. An affirmation of provinces’ right to ban home cultivation.

On the matter of home cultivation, the government stated that personal cultivation is a necessary to the stated goal of displacing the black market, while the rejection of the idea of a public registry (suggested as a means to dissuade criminal elements from getting involved in the industry) stands on the government’s insistence that the proposed legislation already gives it adequate measures to require security clearances and that such a registry “would present significant operational challenges and privacy concerns.”

The rejection of the ban on promotional activities came from similar reasoning, namely, that the act already contains sufficient measures to restrict promotional items.

Over the next few days, the House of Commons will proceed with debate and a vote on the proposed amendments, but with the sitting government’s position now established, the Liberal majority in the House means that it’s more than likely that the government’s response as stated will end up going back to the Senate for review and vote.

Whether members of the Senate will decide to stand firm on their proposed changes is another matter.

Landry says the government’s responses are supportive of a functioning and regulated marijuana sector.

“The decision to reject the amendments is reassuring and supports our view that in order to be effective and make a dent into the black market, the law cannot be too restrictive and needs to give licensed producers adequate tools to ensure their success,” Landry wrote in a client update on Thursday.

Landry says that with approval by the Senate, the Bill could be up for Royal Assent as early as next week.

“In our view, despite some major amendments being rejected, support from the Senate should not be materially changed from the last week when 56 voted in favor and 30 against at the third reading,” he said.

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