Cannabis Outlook 2017: Legalization on the Horizon

It goes without saying that the cannabis industry reached a new high point in 2016. The US voting in favor of legalization (in four states) on November 8, and the Canadian government releasing its task force for recreational use of marijuana on December 13 were certainly two of the year’s biggest moments.
Looking ahead, there is indeed a lot to look forward to in the cannabis sector that goes beyond 2017’s expectations. For starters, the cannabis market was expected to jump over $6.7 billion in the US during 2016, and it’s only expected to increase from there. By 2020, cannabis sales in the US are expected to grow to $21.8 billion.
The story is similar in Canada: according to the Globe and Mail, there are currently 26 marijuana stocks listed in Canada–which has helped the industry soar from almost nothing a few years ago to $4 billion in 2016. What’s more, a report by Forbes.com estimates that the cannabidiol market will grow to $2.1 billion by 2020.
As such, the Investing News Network (INN) had the chance to speak with Alan Brochstein of 420 Investor to get an idea of how the cannabis industry is shaping up in 2017.

Cannabis outlook 2017: legalization in Canada

In Canada, anticipation of the federal government legalizing recreational use of marijuana sometime in the spring of 2017 is no doubt at the forefront of what to look forward to come the new year. As previously mentioned, the Canadian government released its task force laying out the guidelines for its legalization.
When speaking with INN about the guidelines, Brochstein said “it’s very obvious” Canada is set to legalize, but that it’s still a little unclear about it it looks like, or what the time frame will actually be.
“Any time we get updates like this, I think a lot of people like to spin it positively,” he said.
In an interview with the Globe and Mail, Ryan Modesto, managing partner at 5i Research, advised that the recommendations could potentially not be approved.
“While I am sure the government will take them very seriously, it doesn’t necessarily mean they have to listen to anything that’s there,” he told the publication.
Still–some Canadian cannabis companies have given their seal of approval regarding the task force’s guidelines.
Bruce Linton, CEO of Canopy Growth (TSX:CGC), said in a press release that the report is “good news” for Canadians, which provides a “strong policy framework for the government to consider.”
However, Linton expressed concerns that the task force is recommending no separate tax regime for medical and recreational sales.
“A path forward to insurance coverage must also remain a top priority for Canadian policymakers. Cannabis access can only truly be achieved if barriers to affordability are removed,” he said.

Terry Booth, CEO of Aurora Cannabis (TSXV:ACB) expressed similar sentiments regarding the task force in a separate press release. Booth said the company is “very pleased” by many of the recommendations made, which includes maintaining a separate medical access framework for patients.
“We also support the report’s comment with regard to the need for federally supported research into the use of cannabis and cannabinoids for medical purposes, with the explicit aim of facilitating their market authorization as drugs,” he said in the release.
To that end, Cam Battley, executive vice president of Aurora, said in an interview with INN that 2017 is going to be “another enormous year” for the cannabis industry. In addition to his role as executive vice president with Aurora, Battley is a member of the Board of Directors of Cannabis Canada.
“We are working closely with the government to ensure that the legalization of cannabis is done in a careful, appropriate and sustainable manner that protects public health, public safety and is good for consumers and also good from a business perspective,” he said.

Cannabis outlook 2017: uncertainty in the US

Looking at what the market will look like in the US next year, there’s still doubt with respect to what legalization will look like under a Donald Trump presidency.
James Dines, who publishes over at The Dines Letter, said in an interview with INN that the ramifications of Trump’s victory “have not actually been felt.”
“Something big is going to happen,” he said. “I think there will be a big shakeup in the American economy, and that of course impacts the world. I think Trump’s victory was a seminal event and I think that is going to have ramifications to everybody.”
Brochstein, however, said that his “crystal ball” is cloudy due to the absence on the federal policy towards enforcement of the Controlled Substance Act in the US that have legalized cannabis.
“I am optimistic that the medical cannabis market will be just fine, but I am concerned that the federal government could interfere with states with respect to adult use,” he said.
And it’s easy to see why: Jeff Sessions, the attorney general appointed by Donald Trump has made no secret about his opinions on marijuana. At a Senate hearing in April, as reported by the Washington Post, Sessions said, ““We need grown-ups in charge in Washington saying marijuana is not the kind of thing that ought to be legalized, it ought to be minimized, that it is in fact a very real danger. You can see the accidents, traffic deaths related to marijuana.”
According to Haaretz, Sessions has also made the comments that “good people don’t smoke marijuana,” and that the Ku Klux Klan were “OK until I found out they smoked pot.”
That being said, CNBC commented “battling the cannabis industry could be political suicide, given the victories on election day.” The publication also notes that Pew Research found that 57 percent of adults in the US are in favor of legalized marijuana.
On that note, republican states such as Florida, Ohio and Pennsylvania all approved cannabis legalization in 2016. CNBC said it seems “unlikely” that Trump would spend “substantial political capital battling the legalization trend.”
What this means, is that on a political and economic front, it’s suggested that Trump won’t increase enforcement or back down on the government’s current policy. “Instead, the status quo will likely persist, meaning the growth of the industry should continue,” CNBC suggests.

Investor takeaway

In terms of legalization of marijuana in Canada, Brochstein said while it is anticipated for 2017, he suggested sales of marijuana shouldn’t be expected until 2018.
“Between now and then, there’s not a lot for investors to go on except for what’s going on in the medical market, which remains pretty positive,” he noted.
In the US, however, he said what will likely set the tone for the market will be the federal policy on CSA enforcement.
“Unless there is some sort of draconian response, I think that the huge momentum from the new States coming on line will lead to bullish sentiment for the industry and perhaps the public stocks,” he said.
No matter which way you look at it, there are exciting times ahead of the cannabis industry–in Canada and the US–and investors will be sure to keep their eyes open on the growing industry in the coming year.
Don’t forget to follow us @INN_Resource for real-time news updates.
Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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The Blooming Cannabis Industry: 2016 in Review