Canadian Senate Makes Cannabis Legalization Date Unclear

On Tuesday (February 6) lead minister from the Canadian federal government listened to the doubts and concerns of a Senate in need of answers ahead of passing the highly anticipated cannabis legalization bill.

After clearing the house of commons Bill C-45, the cannabis act headed to the Canadian Senate for the last hearing process before being approved. A point of debate for this bill has become the exact timeline for it be enacted and when consumers will be able to purchase recreational cannabis.

Last year, the Canadian Prime Minister dismissed the July 1, 2018, deadline, which was previously reported to have been the government’s target date for enacting the cannabis act.

“The date will not be July 1, I can assure you of that,” Trudeau told the TVA network in Quebec. “I don’t know where that date came from.” The Canadian leader said instead the government was looking at “next summer” to be the target date for legalization.

Potential delay due to time it takes to enforce bill

Now the logistics behind the Senate process have caused a timing issue for the Canadian government. Health Minister Ginette Petitpas Taylor revealed the government will wait up to three months to wait for licensed producers (LPs) to comply with the mandates of the bill.

“The federal government will wait eight to 12 weeks after the legislation is passed before officially lifting the 95-year-old prohibition on cannabis,” The Globe and Mail wrote.

Minister Petitpas Taylor said the government is “still very confident that we’ll be able to meet our goal of July, 2018,” for the enactment of the cannabis act, according to iPolitics.

However, their report indicated the health minister said government officials will need time to comply with the bill after it obtains Royal Assent.

“That comment comes after a government official raised the prospect that bills require a coming into force date after receiving Royal Assent. That could delay implementation for eight to 12 weeks, meaning the deadline could be overshot by months, and that the Senate would need to pass the bill by end of May for Canadians to buy cannabis legally in July,” iPolitics wrote.

Deepak Anand, vice president of government relations at Cannabis Compliance told the Investing News Network (INN) that this unclear timeline for the cannabis act is a result of progress of the Senate hearings.

“I don’t think it’s a matter of not getting approved to the Senate, I just think the Senate is going to take its time in approving the bill, which could delay legalization if that were what to happen, beyond July,” Anand said. “That’s the only risk at this point.”

Bruce Linton, CEO of Canopy Growth (TSX:WEED) said he’s not as concerned with the exact date of enactment for the bill. “[E]very minute that we have longer just allows us to have more assets available and to negotiate better deals,” Linton told The Globe and Mail.

Investor Takeaway

Outside of a significant delay, cannabis investors have waited patiently to see what companies in the sector will be able to deliver with the recreational market available to them.

Analysts in the industry have waited for legalization to evaluate the companies in the space completely, with a full look at their business accounting for recreational products.

“It’s not until the rubber hits the road in the second half of the year with the roll-out of legal adult-use marijuana in Canada that we envision  potential negative operational catalysts (rapid capacity expansion, execution of provincial retail distribution frameworks) that could slow down current trends,” Canaccord Genuity analysts Matt Bottomley and Neil Maruoka wrote in their January research note.

As part of their industry update report for the cannabis market in February, Canaccord wrote they do not expect any imminent negative catalysts for the industry except for the potential of a “meaningful delay” to the legalization of recreational cannabis thanks to the Senate.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.