Booming Marijuana Industry on Track for Growth as Canada Passes Bill C-45

Canada’s booming marijuana industry cleared a major hurdle on Thursday after the Liberal government narrowly passed Bill C-45, the final piece of legislation needed to legalize recreational pot by the summer. Although marijuana stocks were down for the day, the outlook remain bright for investments.

Path to Legalization on Track

Senators voted 44 to 29 to pass the landmark bill amid efforts by the Conservative opposition to kill it. All 28 Conservative senators voted against the bill, while most independents sided with the Liberal government to pass it.

With the vote, the government remains poised to legalize recreational pot by July 1. Under the new framework, the government plans to support a growing industry while controlling how marijuana is grown, distributed and sold.

And grow it will, according to various estimates. Last year, Deloitte forecast a market base for marijuana of between $4.9 billion and $8.7 billion. When factoring direct and indirect growth, the total footprint of recreational cannabis could reach $22.6 billion.

At the same time, the country’s medical marijuana market is growing much faster than previously expected. According to Brian Tang and Anthony de Ruijter of Fundamental Research Corp, the nation’s medical marijuana industry expanded 1,500% in less tahn three years.

Some of Canada’s biggest marijuana companies are Canopy Growth Corp (WEED), Aphira Inc. (APH), Medreleaf Corp (LEAF) and Aurora Cannabis Inc. (ACB).

That said, the path forward isn’t without risk. Provincial disputes regarding taxation and distribution could impact the law’s implementation later this year. At the same time, cannabis companies have very little pricing power due to illicit suppliers operating in the black market.

An increasingly crowded market is another challenge some analysts foresee for Canadian companies. There are about 70 publicly traded pot companies in Canada, which is an extremely high number given the current size of the market.

Although Canada is well ahead of the United States on the regulatory front, several U.S. states have voted in favor of legalization, with many more considering a referendum on the subject. However, the Trump administration’s U-turn on recreational usage could trigger a contentious debate between Washington and states that have legalized the substance.

In a one-page letter issued in January, U.S. Attorney General Jeff Sessions repealed Obama-era guidance on marijuana reform, giving Washington more leeway in enforcing federal laws.

Marijuana Index Declines

Cannabis stocks were down across North America on Thursday, extending their slide to three days. The North American Marijuana Index and its 39 constituents fell 4% to $247.36, the lowest in over three weeks.

Canadian marijuana companies experienced bigger losses on Thursday. The Canadian index closed down 5.2% at $703.34, the lowest since Mar. 1.Nineteen of 24 constituents finished in negative territory.

Meanwhile, U.S. marijuana stocks were down 1.3%.

Although Canada’s economy is one-tenth the size of its U.S. neighbor, its pot sector has a much higher market cap. The Canadian Marijuana Index is capitalized at $24.37 billion, compared with $5.19 billion for its U.S. counterpart.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi