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Published January 29, 2021
U.S. Senate Majority Leader Chuck Schumer said he’s putting together a new federal marijuana legalization bill that would allow states freedom to “do whatever they’d like” and put tax revenues into minority communities most harmed by prohibition.
A New York Democrat who filed a marijuana descheduling bill in 2018, Schumer said his latest effort draws from a number of reform bills. He reportedly is working with both Democratic senators and some Republicans.
He talked about the approach to decriminalizing marijuana in an interview on Instagram Thursday with former NBA basketball player Al Harrington, who is CEO of Los Angeles-based cannabis company Viola Brands.
In addition to provisions to help minority communities, Schumer indicated that he wants an industry that isn’t taken over by corporations.
“I don’t want to see these big tobacco companies coming in and shoving everyone out,” he said.
The Democrats recently took control of both chambers of Congress, as well as the presidency, likely providing the best opportunity yet for federal marijuana reform.
In a research note Friday, St. Louis-based investment banking firm Stifel characterized Schumer’s leadership on the issue and the Democratic trifecta as a “Goldilocks” scenario for the American marijuana sector.
The development, Stifel said, “could foreshadow the most important catalyst in the history of the US cannabis industry,” while noting significant obstacles could yet come.
“We believe Sen. Schumer’s comments outline a bill that resembles the STATES Act, but includes social justice provisions, and could address obstacles (such as the onerous Section 280E tax provision) to have a significant positive impact on cannabis operators’ regulatory environment,” Stifel analyst Andrew Partheniou wrote.
Schumer appears to be trying to strike a balance between the social justice-focused Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, favored by progressives and embraced by the U.S. House in December, and a STATES approach, which might be more palatable in the conservative Senate.
In the Instagram interview, Harrington urged Schumer to include other stakeholders such as minorities in the discussions and negotiations.
The industry is poised for a big shakeup even though the prospects for passing major changes to federal policy remain slim.
A Curaleaf medical marijuana product is displayed.
Curaleaf, America’s largest cannabis company, put over 16 million shares on the market overnight and brought in $300 million — in equity and debt sales — in under 24 hours. | Hans Pennink/AP
By PAUL DEMKO and NATALIE FERTIG
01/31/2021 07:00 AM EST
The day after Democrats swept both Senate seats in the Georgia runoff election — giving them a slim majority and installing pro-marijuana legalization leaders in the upper chamber — Curaleaf Chair Boris Jordan decided to try something big.
“I literally called my bankers and I said, ‘Guys, I think this is going to be a big change. Let's do an [overnight] offering,’” Jordan recalled.
Curaleaf, America’s largest cannabis company, put over 16 million shares on the market overnight and brought in $300 million — in equity and debt sales — in under 24 hours.
The company’s payday foreshadows how the entire cannabis industry is poised for growth and consolidation as Democrats take full control of the federal government. Companies are positioning themselves for the greater likelihood that federal cannabis restrictions will be loosened significantly.
Sales are already booming. Cannabis sales hit $20 billion last year — a 50 percent jump over 2019. Legalization continues to spread across the country, with more than one-third of Americans now living in states where marijuana is fully legal.
“There's no stopping the industry now,” said Andrew Kline, who recently joined the law firm Perkins Coie after serving as public policy director for the National Cannabis Industry Association. “The bigger players are going to be interested in acquiring smaller companies and becoming multi-state operators or expanding their footprint in different states.”
What’s happened so far?
A flurry of deals and capital raises have been made in recent weeks, in addition to Curaleaf cashing in.
Cannabis behemoth Cresco Labs recently bought Bluma Wellness for $213 million, giving it a beachhead in the booming Florida market. There are now more than 450,000 medical marijuana patients in Florida — a more than 50 percent increase in the last year — and 310 dispensaries across the state, nearly 100 more than at the start of 2020.
“I think you're gonna see a lot of [mergers and acquisitions] coming,” said Bluma Wellness CEO Brady Cobb, who will join Cresco immediately and focus on building its Florida business. “It's going to be driven by the fact that institutional capital sees light at the end of the tunnel for these companies.”
Cresco also recently announced it will raise $125 million from investors, citing plans to accelerate its growth. The company was already soaring ahead of the political shifts: It had third-quarter revenues of $153 million — more than four times as much as during the comparable period in 2019.
Canadian companies also are eyeing the U.S. market. Cannabis giant Canopy Growth Corp. recently announced a deal — contingent on U.S. legalization — to acquire a big stake in TerrAscend, which has operations in California, Pennsylvania and New Jersey.
The deal is similar to Canopy’s arrangement to buy Acreage Holdings, which has 71 dispensaries and operations in 15 states, if marijuana restrictions in the U.S. are lifted.
Stock prices for some of the biggest cannabis companies have skyrocketed in recent weeks. Acreage’s stock price has nearly doubled since Democrats won control of the Senate, while the price of Cresco’s shares have jumped by more than 30 percent.
“People are scrambling right now, and they're taking a calculated risk that federal change is going to happen in the near term,” Kline said.
What’s the reality on Capitol Hill?
Despite the ebullient feelings among industry advocates and investors, the likelihood that Congress will make big changes to federal marijuana restrictions remains slim. That’s in large part because Democrats will have a razor-thin majority and need 60 votes to pass most legislation.
That’s why, despite the House’s passage of the MORE Act in the last Congress — which would federally decriminalize cannabis and expunge records — many in the weed industry have their sights set on banking legislation in the new Congress. The SAFE Banking Act — which would make it easier for banks to offer financial services to the cannabis industry — passed the House with broad bipartisan support in 2019, but went nowhere in the GOP-controlled Senate.
With Democrats now in charge of both chambers, industry insiders and policy experts believe banking has a good shot at becoming law — and a much better shot than comprehensive legalization legislation. Even the incoming ranking member on the Senate Banking, Housing and Urban Affairs Committee, GOP Sen. Pat Toomey of Pennsylvania, said he’s open to discussing the issue.
“We're not going to get full scale legalization from this Senate,” said John Hudak, a cannabis policy expert at The Brookings Institution.
Hudak, however, isn’t surprised by the jump in cannabis stocks following the Georgia runoff.
“There's a real problem within the business community about an avoidance of working with people who truly understand how federal legislative politics works,” Hudak said. “And there is also a serious problem of lobbyists and others committing political malpractice in selling these businesses a really bad basket of goods.”
Despite the post-election stock market jump and Curaleaf’s own fundraising success, Jordan said he agrees with Hudak’s overall assessment. He doesn’t believe marijuana legalization is likely to pass this Congress, and his business decisions are still motivated more by state policy changes.
“We're making very large bets,” Jordan said. “Not based on federal legal changes, but based on what we're seeing the population do at the ballot box.”
No stopping the states
The legalization boom continues to spread across the country. Voters in Arizona, New Jersey, Montana and South Dakota approved ballot measures to legalize, tax and regulate recreational marijuana in November. Altogether, that means 18 million more Americans now live in states where the drug is fully legal.
State legislatures across the country are eyeing legalization too, at least in part because of big budget deficits caused by the pandemic. New York, Virginia, Connecticut and New Mexico are among the states where there will be strong pushes to pass recreational legalization bills in the coming weeks.
Even relatively mature markets saw huge growth in 2020, fueled by anxious Americans stuck in their homes smoking more weed. Sales in Colorado topped $2 billion for the first time, while Oregon saw a 40 percent spike in revenues.
“Companies are doubling [and] tripling in size so that they can keep up with demand,” Trulieve CEO Kim Rivers said. Trulieve is the biggest player in Florida’s medical marijuana market, with a growing footprint around the country. “At the end of the day, there's still incredible opportunity, even if that doesn't immediately translate into full federal legalization.”