America’s Established Cannabis Industry Will Learn From Canada’s New One
U.S. cannabis laws have created a patchwork of medical, recreational and no-use states. Across the border, Canada recently legalized recreational adult use of cannabis across its entire country. The new law’s effects on banking, criminal justice, and industry efficiency will offer lessons for the United States.
Legalization of cannabis in Canada will undoubtedly act as a litmus test for the U.S. said Terry Taouss. He is president of Tidal Royalty which connects investors with licensed cultivators, manufacturers, and dispensaries. “The Canadian experience has required co-ordination across all levels of government (federal, provincial, municipal) and it is going to provide a framework” for the U.S. and other countries to see what works and what doesn’t, he said.
Bankers and business people will be watching the finances of Canadian cannabis companies very closely. Richard Batenburg Jr., fund manager at Cliintel Capital Management Group said he expects to see that national legalization will stimulate investment in the industry. From there, access to reasonably priced capital, fair taxation and reasonable banking fees should help businesses stay compliant and provide safe product he said.
There are of course financial risks to investing in the new market, demonstrated recently by the Canadian company Tilray. It captured headlines when its stock shot up in value by 77% and then dropped 47.9%.
Cannabis companies in the U.S. have mostly relied on private funding because without federal legalization banks could lose their federal charter for working with a marijuana company. “Banks more than most should be pushing Congress for better guidance on doing business with Cannabis companies through federal legalization,” said Dan Anglin, founder & chief executive of CannAmerica which makes THC-infused gummies.
The effects on Canadian criminal justice will likely include a reduction in the prison population and cost savings to law enforcement and courts no longer prosecuting cannabis offenses. Nancy Whiteman, founder and chief executive of edibles-maker Wana Brands said, “When you look at the money that is spent in the U.S. on marijuana-related prosecution and punishment, it is very likely that removing marijuana offenses for things like possession (within legal limits) will save Canada an enormous amount of money.” Police will also be more available to focus on other types of crime, she said.
“Cannabis legalization should, at the very least, eliminate one of the mechanisms that has overly-targeted marginalized populations,” said Taouss.
A possible negative consequence could be that criminals who have been edged out of the illegal cannabis business by legal sales may “push more non-weed products into their networks,” said Hamish Sutherland, chief operating officer of WhiteSheep Corporation which grows cannabis and invests in the industry.
Keeping U.S. laws state-based will keep the industry from developing efficiently and robustly said Taouss. The current prohibition of movement of products across state lines for example, means that U.S. companies are building out their production capacity inefficiently, he said. This is a disadvantage when competing against Canadian cannabis companies that are “already building out not just national, but international, production and distribution networks,” he said.