Canadian Pot Industry to Benefit from US Uncertainty

Canadian pharmaceutical marijuana companies say the sudden reversal on pot policy by the United States could result in a little more green north of the border.

Last week, U.S. Attorney General Jeff Sessions rescinded the Cole Memo instructing federal authorities not to interfere with states which have their own comprehensive framework on marijuana legalization. The move caused concern about the stability of the growing marijuana industry in the U.S. and is in turn perking up industry players in Canada.

“For all cannabinoid-based companies in Canada this is good news,” said Boris Weiss, CEO of Burnaby-based pharmaceutical marijuana company Medipure Pharmaceuticals. “It gives the investor a concrete platform to invest into.”

Weiss said Canada has been a leader on marijuana-based drugs used for relieving pain or treating illnesses like arthritis for some time, and the news from the U.S. should bolster it further.

The Cole Memo, named for the U.S. attorney general who penned it in 2013, instructed federal law enforcement not to enforce federal marijuana laws for possession after Washington state and Colorado legalized marijuana.

The memo tells law enforcement and prosecutors to focus on criminal organizations making money off marijuana, preventing its use on federal property and keeping it out of the reach of minors, among other issues.

With the Cole Memo rescinded — days after California legalized marijuana and caused pot-related stocks to spike — federal authorities in states where marijuana is legal could choose to enforce prohibition.

In stark contrast, the Canadian government is expected to unveil its plan for marijuana legalization this year and companies are gearing up to supply the market.

Ottawa said pot will be legal across Canada as of July. The government is working on what legalization will look like and is holding public consultations as part of the process.

A report in February this year from New Frontier Data, which specializes in marijuana industry analysis, predicted by 2020 the marijuana industry in the United States would employ more people than manufacturing.

According to the Associated Press, the move by Sessions last week “threw the burgeoning movement to legalize marijuana into uncertainty.”

With the apparent aversion to further legalization and the message it sends from Washington D.C. to producers, Canada will become the place to be for the industry, Weiss said.

He said uncertainty in the U.S. and government support in Canada could result in up to $200 million in investment for his industry in the short term as a lack of federal U.S. government support will worry financial backers.

“It's convoluted and clouds the issue in the U.S. and it basically clarifies and identifies the opportunity in Canada,” Weiss said.

Investors will still put some money into operations in the U.S., but they will recognize it as being much riskier, he added.

Others in the industry said they expect the positive outlook for Canadian cannabis to continue once the U.S. industry absorbs the hit from this week.

Gary Symons, director of communications for Winnipeg-based Delta 9 Biotech, said on top of the direct investment he expects an initial run on the stock market for Canadian marijuana companies.

“I get calls every week from Americans who want to invest in the company,” Symons said. “Investors are going to look for a safe haven for where they can invest in the fastest growing business in the world.”

Symons said the next step is Canadian expansion into the global market, and with U.S. companies now having “their shoelaces tied together” Canada's industry will be positioned to dominate worldwide.