Jeff Sessions’ War on Marijuana Rattles Cannabis Stocks, but the Battle Is Far from Over

North American marijuana stocks plunged for a second straight session Thursday, as investors continued to weigh the Trump administration’s policy U-turn on recreational cannabis.

North America Marijuana Index

The Marijuana Index, which tracks 39 of the leading cannabis companies in November America, plunged 6.4% to 327.58. It was the index’s second consecutive decline and third major reversal since Jan. 4, the day Attorney General Jeff Sessions reversed the Obama-era guidance on cannabis laws. In a one-page letter, Sessions said the government would renew its commitment to tackling the cannabis industry.

Despite recent volatility, the has gained more than 73% over the past month.

Canadian Marijuana Industry

Much of the decline on Thursday was concentrated on the Canadian side of the border. The Canadian Marijuana Index, which is capitalized at $28.4 billion, fell 9.8% to 908.27.

Canadian pot stocks started off the year with a bang as a number of major deals were announced. In the first week of January, Edmonton-based Aurora Cannabis Inc. (ACB) announced a $55 million acquisition of The Green Organic Dutchman Holdings, an Ontario-based licensed medical cannabis producer.

Emerald Health Therapeutics, another licensed medical marijuana producer, also announced an undisclosed Canadian investor agreed to buy a $25 million stake in the company.

Meanwhile, Aphira Inc. of Leamington, Ontario announced it had closed a $115 million bought-deal share offering.

Sessions Unlikely to Deter Cannabis Market

The Attorney General appears to have reignited Washington’s war on marijuana. The policy of overarching federal enforcement of cannabis laws will likely create some hesitation on the part of investors and entrepreneurs, but is unlikely to change the course of history following broad legalization campaigns in several states.

Democratic representatives from pro-marijuana states, such as California and Colorado, have criticized Sessions’ reversal on the Obama administration policy that allowed states to legalize weed without federal approval.

On Jan. 4, the Colorado State Democrats issued the following statement via Twitter:

“We’ll give Jeff Sessions our legal pot when he pries it from our warm, extremely interesting to look at hands.”

It’s not just Democrats who have raised objections to Sessions’ decision. Colorado Republican Senator Cory Gardner called the move “a trampling of Colorado’s rights.”

“Why is Donald Trump thinking differently than what he promised the people of Colorado in 2016?” Gardner said in a Jan. 4 Senate speech. “Thousands of jobs at risk, millions of dollars in revenue, and certainly the question of constitutional states rights — very much at the core of this discussion.”

The legalization of recreational weed has unleashed a multi-billion-dollar industry that will only grow over the next five years. Current valuations place legal pot sales in the U.S. at well over $6 billion. However, it has been estimated that the state of California alone generates more than $6 billion in sales.

Market participants are observing California closely for clues about how the industry will grow and evolve over time. The state may already represent some 70% of legal marijuana sales across the country, making it the single-most important jurisdiction in the fight for legalization.

The size and growth rate of the legal cannabis sector is subject to great speculation. Research by Ackrell Capital says a hands-off policy approach to cannabis could generate $120 billion in sales as early as 2020.

Featured image courtesy of Shutterstock. 

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, 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