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A policy analyst from TD Cowen says that cannabis legalization in the United States is “inevitable” and believes that it is just a question of weathering a bumpy legislative landscape for the next several years. Originally, many analysts thought federal cannabis legalization was finally on track after the Democrats secured the House, Senate and White House, especially as President Joe Biden had based part of his campaign on cannabis reform.
However, while the Biden administration has taken some cannabis-related action, including issuing a mass pardon for people with certain cannabis-related convictions, the administration has barely made any moves to legalize cannabis at the federal level.
With President Biden’s first term fast approaching its end, many pundits and investors are quickly losing hope for federal cannabis legalization, particularly in the next couple of years. Capital investment in the state-legal cannabis industry is extremely low, and the AdvisorShares Pure U.S. Cannabis ETF, current holder of all U.S.-based marijuana companies, is trading at just $6.80 a share down from around $52 a share in early 2021.
Federal prohibition has made operating in the cannabis sector almost untenable; cannabis businesses are barred from interstate commerce, they struggle to obtain investment and financing, and they aren’t allowed to make normal business tax deductions. Even so, TD Cowen policy analyst Jaret Seiberg says federal legalization is inevitable. Polls show that a majority of the American population is in favor of either decriminalization or outright legalization, and a cadre of top lawmakers has thrown their weight behind cannabis reform.
Bipartisan legislation such as the SAFER Banking Act seeks to legitimize the cannabis sector by allowing industry players to access financial services from banking institutions. Senate Majority Leader Chuck Schumer and other senators have also been working on a bill that would legalize cannabis at the federal level.
In addition, a group of Massachusetts cannabis businesses has filed a lawsuit alleging that the Controlled Substances Act, which classifies cannabis as a Schedule I controlled drug, is an unconstitutional infringement on the power of states with legal cannabis. Although a favorable ruling wouldn’t make interstate cannabis trade any easier, it would significantly ease the operations of already existing cannabis businesses by granting them access to essential financial services, such as bank accounts and cashless payments.
Legalization may also be spurred by executive action. For instance, Biden recently asked the U.S. Department of Health and Human Services (HHS) to review marijuana’s federal status as a controlled substance. Subsequently, a letter dated Aug 29, 2023, which was obtained by Bloomberg, revealed that a top HHS official had recommended that the Drug Enforcement Agency (DEA) reschedule cannabis from Schedule I of the Controlled Substances Act (CSA) to Schedule III.
The cannabis industry, including enterprises such as Curaleaf Holdings Inc. (CSE: CURA) (OTCQX: CURLF), awaits any definitive action taken by the DEA as this will have a major effect on the trajectory of the marijuana industry in the United States.
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