There were always some questions about what a Trump Gov’t would mean to the cannabis industry.  With very little mention of it during the elections and after him taking office, industry participants and companies had no clear indication on what his presidency would mean to the cannabis industry.  Today, comments from press secretary Sean Spicer has shed some light on what their thoughts are on the subject of medical and recreational marijuana.  

While the comments haven’t given a green light for moving forwards with cannabis reforms at the federal level, it does look like the president appreciates medical marijuana laws.  However the recreational marijuana initiatives by various states may come under scrutiny and become questionable under Jeff Sessions at the Dept. of Justice.   The comments below don’t give much indication on what this would mean to the recreational market, but it does create a lot more uncertainty.    The question around the recreational market will be left to the Dept. of Justice and Secretary Sean Spicer does believe there will be greater enforcement around it and the DOJ will be looking into it further.  What “greater enforcement” means to States who have current or planned recreational laws is uncertain, but we are confident they will get more aggressive with the illegal and grey market area when it comes to marijuana sales and use.

Press Briefing by Press Secretary Sean Spicer, 2/23/2017, #15

Q     I have a question on medical marijuana.  Our state voters passed a medical marijuana amendment in November.  Now we're in conflict with federal law, as many other states are.  The Obama administration kind of chose not to strictly enforce those federal marijuana laws.  My question to you is:  With Jeff Sessions over at the Department of Justice as AG, what’s going to be the Trump administration’s position on marijuana legalization where it’s in a state-federal conflict like this?

MR. SPICER:   There’s two distinct issues here: medical marijuana and recreational marijuana.  

I think medical marijuana, I’ve said before that the President understands the pain and suffering that many people go through who are facing especially terminal diseases and the comfort that some of these drugs, including medical marijuana, can bring to them.  And that's one that Congress, through a rider in 2011 -- looking for a little help -- I think put in an appropriations bill saying the Department of Justice wouldn’t be funded to go after those folks.  

There is a big difference between that and recreational marijuana.  And I think that when you see something like the opioid addiction crisis blossoming in so many states around this country, the last thing that we should be doing is encouraging people.  There is still a federal law that we need to abide by in terms of the medical -- when it comes to recreational marijuana and other drugs of that nature.  

So I think there’s a big difference between medical marijuana, which states have a -- the states where it’s allowed, in accordance with the appropriations rider, have set forth a process to administer and regulate that usage, versus recreational marijuana.  That’s a very, very different subject.

Q:  So is the federal government then going to take some sort of action around this recreational marijuana in some of these states?

MR. SPICER:  Well, I think that’s a question for the Department of Justice.  I do believe that you’ll see greater enforcement of it.  Because again, there’s a big difference between the medical use which Congress has, through an appropriations rider in 2014, made very clear what their intent was in terms of how the Department of Justice would handle that issue.  That’s very different than the recreational use, which is something the Department of Justice I think will be further looking into.  

So what does this mean for companies operating in the recreational market?  It surely does create uncertainty and that is something the market doesn’t like.   The cannabis sector has gained much attention over the last year, especially leading up to the US elections and after.  Many of the stock prices has risen significantly over the last 6 months as the industry is anticipating the recreational market will continue to expand in the various states which have moved towards legalization. 

What does this mean for investments in the US related cannabis industry?  We believe that the euphoria in company valuations and the stock price rising as it has over the last 6 months will become subdued.  The sector needs to take a breather and digest the potential outcome of anti-recreational DOJ.  While we remain optimistic on the sector overall, investors should keep in mind the stock prices and valuations probably have gotten ahead of themselves and are likely for a correction.  We will be providing an update to our newsletter subscribers very shortly on what this means to their current and future investment strategies and objectives when it comes marijuana stocks with exposure to US markets.  Sign up for our newsletter to get additional insights and opportunities on the cannabis sector.