Legal Cannabis Could Go Up In Smoke, Leaving Investments In Jeopardy

American cannabis

If you told someone ten years ago that recreational cannabis would be legal in several American states, they’d think you were smoking something. (Cannabis, probably). Yet right now, in places like Colorado, Oregon, and Washington, you can walk into any number of dispensaries, buy up to a certain amount of weed, and walk out without breaking a single law. Several other states like Massachusetts and California will soon follow by regulating and heavily taxing cannabis at specialized locations throughout their states.

Since Colorado first passed legislation, the legalization of cannabis in America created new jobs, raked in hundreds of millions in tax revenue, and reduced crime. At the same time, major corporations and startups alike started pulling out all the stops to enter the legal cannabis space. These companies developed new products, growing methods, and other revenue-generating ideas that are good for customers and their own bottom lines. Some companies even went public, selling stock to shareholders to raise money and grow as fast as their plants.

Since last November, however, the future legal status of cannabis suddenly became quite cloudy when Donald J. Trump became elected. Due to his appointment of Attorney General Jeff Sessions, who is notably anti-cannabis, the new administration could curb the growth of legalization in the country. They could also roll back the clock and make cannabis an illicit drug in all states once more. Not only would this devastate states relying on this new source of tax revenue, it could also grind cannabis companies to a screeching halt.

There are countless American weed startups operating in the recreational and medical spaces.

Everything from science-based growing solutions to celebrity-endorsed dispensaries benefit from the legalization of cannabis. In the last several years, venture capitalists and private investors spent hundreds of millions on cannabis-oriented companies. These wealthy speculators hoped to get in on the ground floor before more states started passing legislation in favor of legal weed. Even multi-national corporations like Monsanto ($MON) put some money into exploring cannabis, all in hopes to take a percentage of the market share in the future. Since cannabis is newly legal, hugely popular, and growing in demand, more companies want to benefit from the billions spent on products, accessories, and everything pertaining to legal weed.

Canadian companies also benefit from America’s legal weed states.

While weed-based companies in the country cannot export their goods to the select American states, they would eventually benefit in the future when they’re allowed to. In the meantime, existing Canadian cannabis companies are investing in American grow houses and exporting related technology to U.S. producers/manufacturers. This lets them get a foot in the door should they be able to conduct more business in the future.

The current administration, however, thinks using cannabis is as bad as using opiates.

Attorney General Jeff Sessions went on the record several times talking about how cannabis should not be legal. During his confirmation hearing, he stated, “We need grown-ups in charge in Washington to say marijuana is not the kind of thing that ought to be legalized, it ought not to be minimized, that it’s in fact a very real danger.” During talks with the press and other elected officials, Sessions state that the future of legal cannabis remains unclear. Press secretary Sean Spicer most recently compared the drug to opiates.

Sessions and company could negatively impact legal weed’s future.

As Attorney General, Sessions could set in motion legislation that would not only prevent future states from passing cannabis legalization laws, but strip current states from keeping existing dispensaries and grow houses open. This would take a long time to accomplish, as many democrats are advocates for legalization and the existing legal states are now privy to millions in tax revenue that they didn’t collect before. Yet with the right maneuvering by Sessions and his fellow Republicans, we could see cannabis become an illicit substance again. (The DEA still considers it a Schedule I drug.)

How will this impact weed-based companies?

If weed becomes illegal again, companies that specifically work in the space will either have to diversify their business or close entirely. If a business 100% depends on the legal status of cannabis, they theoretically couldn’t possibly continue to operate without working on other things. Canadian companies would also decline, as their future business prospects in the U.S. would be non-existent.

This is all a hypothetical, yet still very possible. The Trump administration did not explicitly say they would roll back states’ rights to legal weed, though they could. They also didn’t say they would prevent future states from voting on the idea, though they could do that, too. Yet the sheer possibility of making cannabis illegal again is frightening some people from investing in the space right now. After all, if future laws could prevent your investment from making any revenue whatsoever, why would you invest in that sector?