Heading into a November election, there are few cannabis-related issues that have achieved bipartisan momentum at the state or federal levels in the U.S. In both blue and red states, lawmakers have continued to enact frameworks for cannabis use, whether medical or recreational.
With growth continuing despite COVID-19, we have observed three trends that we believe play a key role in defining the American cannabis sector’s outlook in the coming months.
As much in the U.S. as anywhere else, cannabis has long resided at the centre of multiple overlapping social and cultural vectors. A decades-long war on drugs, and prohibitions mired in social issues have contributed to making cannabis a multi-faceted issue across the U.S.
But we think the dissonance has reached an untenable position during COVID-19, as state-level cannabis policies are finally starting to catch up to public opinion. A Gallup poll from fall 2019 showed that two-thirds of Americans supported legalizing cannabis, and the essential business designation from lawmakers on both sides of the aisle shows that the states are outpacing the federal government when it comes to reflecting voter opinions on the issue.
Barring an October surprise, federal cannabis reform will not likely be a ballot box item in 2020. On the Republican side, recent allegations that the attorney general overwhelmed several multi-state operators with onerous regulatory requests suggests the executive branch’s disregard for the industry. On the other side, the Democrats are running Joe Biden who has backed off previous statements condemning legalization. More recently, a Biden task force’s recommendation to the Democratic National Committee’s Platform Committee involved rescheduling cannabis on a federal basis but leaving the decision to legalize recreational cannabis in states’ hands.
With several other issues expected to demand the population’s attention leading up to the election, we do not expect much movement on federal cannabis policies. Reform could come in the form of social justice policy related to recent protests, but if this is the case, it’s unlikely to include federal legalization.
But there have been recent encouraging developments, including the addition of certain key provisions from the SAFE Banking Act into the HEROES Act. This second stimulus package failed once it hit the Republican-controlled Senate, but it does suggest that a shift to a Democratic-controlled House and Senate this fall could make the playing field a bit better for cannabis companies in the new year.
Political gridlock and patchwork policy haven’t hurt our positive outlook on the U.S. cannabis market. Sales data from states where cannabis is legal illustrate that the sector has the potential to grow despite a lack of cohesion between the state and federal governments.
In Oregon, sales grew 45% year-over-year in the month of April, totalling US$89 million in recreational and medical revenues. Ohio and Arkansas, two of the more recent states to legalize medical cannabis, both reported strong numbers. Ohio’s sales reached US$14.2 million in April, up nearly 50% from March as retail infrastructure developed. Arkansas reported that 40% of its annual medical cannabis sales have come since the beginning of March. And finally, Florida has seen a steady increase in cannabis sales during COVID-19.
The number of U.S. states where cannabis is legal continues to grow. Voters from both parties are trending towards consensus support of federal legalization. But right now, many other issues and a lack of cohesion between the parties controlling the House and Senate mean that cannabis policy may be out in the cold for a while longer.
We remain optimistic, though, in the long-term prospects for legal cannabis in the U.S. As other issues are resolved, and the political climate becomes more amenable to agreeing on cannabis, we believe the U.S. could eventually unlock the single largest cannabis market in the world, creating a friendly environment for entrepreneurs, existing operators, and cannabis consumers and patients.
This is not an offer to sell or a recommendation to trade in any securities. This information is provided as of the date hereof. This document contains data obtained from third parties that Canopy Rivers has not independently verified. This document also contains forward-looking information within the meaning of Canadian securities law, which is based on certain assumptions. While management believes these assumptions are reasonable based on information available as of the current date, they may prove to be incorrect. Many assumptions are based on factors outside of Canopy Rivers’ control and actual results may differ materially from current expectations. Forward-looking information involves risks, including, but not limited to, the risk factors set out in Canopy Rivers’ most recent Management’s Discussion and Analysis and Annual Information Form. You should not place undue reliance on forward-looking information. Except as required by applicable law, Canopy Rivers assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances.
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