Marijuana News for Today: U.S. Federal Law Impeding Marijuana Businesses
Marijuana News Today
The archaic U.S. federal laws regarding marijuana once again rear their ugly heads in the marijuana news today as we look at how pot businesses are forced to adapt to all the obstacles the laws present.
A quick refresher: Marijuana is classified as a Schedule I drug, making it among the most “dangerous” drugs according to the U.S. federal government. As such, it is strictly prohibited across the U.S.
But walk on down to California and you’ll see that this law is not exactly being enforced. That’s because the state itself voted to legalize the drug and the feds are choosing to not enforce the law.
This leaves the state in a limbo where marijuana businesses operate every day, technically in violation of federal law even though state law supports them.
But one of the biggest issues—if not the biggest issue—has to do with banks.
Unwilling to run afoul of federal law, large banks have, by and large, refused to allow marijuana companies to take advantage of their services. That means no deposits and no loans.
Both, as you can imagine, are extremely frustrating in the modern marketplace.
Many marijuana businesses across the U.S. have resorted to all-cash transactions, even going as far as to pay their employees only in cash. (Source: “Marijuana startups handling millions of dollars are forced to hide cash and use secure vaults because they’re shut out of the banking system,” Business Insider, September 4, 2018.)
This creates a dangerous, toxic environment where you have armored cars carrying hundreds of thousands, sometimes millions of dollars in armored trucks while marijuana owners are forced to sit down and count out their hauls every day.
Fraud, theft, tax collection difficulties…all are exacerbated by these businesses being forced into an all-cash mode.
Furthermore, the federal law also denies marijuana companies from taking advantage of common deductions like business expenses, meaning that some marijuana businesses are effectively paying a tax rate several times higher than other businesses.
To get that straight, the federal government has put in place onerous obstacles that make doing business more difficult and prone to crime, then turns around and overtaxes these businesses relative to other industries, all under the guise of this being a technically “illegal trade.”
In other words, it makes absolutely no sense.
What This Means for Marijuana Stocks
The end result is that marijuana companies in the U.S. are going to face difficulties when it comes to growth and receiving the necessary startup capital to generate new businesses.
This is hardly an ideal situation for a burgeoning industry with so much potential.
The federal laws are outdated and due for a change…but that likely won’t come for at least a few years.
While some half-measures have been proposed—like a bill that would allow states that have voted to legalize marijuana to be made exempt from the federal law governing the drug—only when the U.S. fully legalizes marijuana will all the kinks sort themselves out and marijuana companies have the opportunity to grow to their full potential.
Canopy Growth Stock
While the marijuana news today politically isn’t exactly all rainbows and sunshine, it is another beautiful day for some on the marijuana stock market.
Starting with the industry leader, Canopy Growth Corp (NYSE:CGC) is up another seven percent in early-morning trading, after registering a muted week to end August.
The company fell by about two percent over the past five days, before this Tuesday explosion.
CGC stock is still the toast of the town after receiving that massive $3.8 billion investment from Constellation Brands, Inc. (NYSE:STZ).
CGC stock remains the industry standard, leaving many other companies behind as it registers gains that similarly sized rivals have yet to match.
In September, I expect the good times to keep rolling as hype will once again mount around the October 17 marijuana legalization date in Canada.
With Canopy Growth stock’s focus on global expansion, product expansion with cannabis-infused beverages, and the ability to complete huge deals and bold moves, there’s really no better alternative right now in the pot stock market for long-term investments.
Aurora Cannabis Stock
Perhaps not as exciting as Canopy Growth stock (few are), Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB) finds itself up about two percent to start the day, after having dropped about six percent in the previous week.
The near-universal fall in the industry last week was to be expected. After all, the climb in August was so abrupt and massive that the market had to respond at some point by pumping the brakes.
Fortunately, it was a light touch rather than a screeching halt, and we’re seeing marijuana stocks once more begin to climb.
Aurora Cannabis stock also made waves by announcing that it had closed its debt facility with a major Canadian bank, Bank of Montreal (NYSE:BMO).
That speaks to the huge advantage that Canadian marijuana stocks hold over U.S. marijuana companies, but that’s a discussion for a later date.
CGC & ACBFF Stock Performances
In the below chart are the recent performances of the stocks for Canopy Growth Corp (black line) and Aurora Cannabis Inc (blue line):
Chart courtesy of StockCharts.com
Analyst Take
The future of the marijuana industry is bright and exciting, but the obstacles in place by the U.S. federal government are slowing that future’s arrival. The marijuana news today is just about that—the law is still trying to catch up with the industry. In the near future, we’ll see this all sorted out.
The question, as always, concerns the “near” part. I’d wager that in between two and five years, we’ll see major marijuana legislation begin to make its way through the bureaucracy.
But until then, marijuana companies in the U.S. are getting the short end of the joint.
