Marijuana Stocks Could Soar Thanks to Trump's Comments on Marijuana Legalization

Trump on Marijuana Stocks

In the past two weeks, President Donald Trump squabbled with G7 allies and traversed half the globe to negotiate with the “Little Rocket Man” of North Korea. But, believe it or not, we’re most interested in something he said before any of that happened.

Trump was waiting to board “Marine One,” the presidential helicopter that would be carrying him to Andrews Air Force Base, when a reporter asked him about a bill put forth by Senator Cory Gardner (R-Colorado).

The bill would prevent the Department of Justice—or more specifically, Attorney General Jeff Sessions—from obstructing the sale of recreational marijuana in states like California and (you guessed it!) Colorado, where voters have elected to decriminalize cannabis-related products.

“I support Sen. Gardner,” said Trump when asked about the bill. “I know exactly what he’s doing. We’re looking at it. But I probably will end up supporting that, yes.” (Source: “Trump says he is likely to support ending blanket federal ban on marijuana,” Los Angeles Times, June 8, 2018.)

It was an offhand remark, something that the president said without a great deal of thought. Yet, it moved markets. What’s more interesting, however, is that his words contradicted those of the Department of Justice .

But maybe the contradiction shouldn’t surprise us. Trump has openly criticized Sessions in the past, calling him “weak” and “disgraceful.” Trump even voiced regret for having hired him.

I think the animosity between them is significant. It means that, in a standoff between weed-friendly states and the Department of Justice, Trump might side with the states.

This translates into good news for Senator Gardner’s bill. Why, you ask? Well, because, whether you’re a fan of the president, there’s no denying that his support will likely drag fence-sitting Republicans into the “Yes” camp. They respond to strength.

So, what started as a passing remark might help Congress cobble together real-life legislation.

Senator Gardner’s Marijuana Bill

Senator Gardner’s bill is a bipartisan effort with some big names attached to it, including Senator Elizabeth Warren (D-Massachusetts).

If passed, the bill would transform the legal framework for cannabis businesses in the United States, freeing them up to pursue bank financing or listing on U.S. stock exchanges.

“If you are in the marijuana business…you can’t get a bank loan or set up a bank account because of concern over the conflict between state and federal law,” said Gardner at a news conference to unveil the new bill. (Source: Ibid.)

“We need to fix this. It is time we take this industry out of the shadows, bring these dollars out of the shadows.”

Although the Gardner-Warren bill faces a reluctant Congress, tentative support from President Trump could push the conversation forward. After all, it was President Trump who stopped the Department of Justice from cracking down on weed companies in April 2018.

He has taken action in the past, and that may convince GOP lawmakers to get on the right side of history before the ink is dry.

What could also help is reframing the issue as one of “states’ rights”—something that Republicans in Congress have long supported.

“This is a chance for us to express that federalism works,” said Gardner. We have “to take an idea that states have led with and provide a solution that allows them to continue to lead.”

What’s Next for Marijuana-Legalized States?

By 2025, the U.S. marijuana market’s expected worth could reach $24.1 billion. (Source: “Current and projected legal cannabis market value in the United States in 2016 and 2025 (in billion U.S. dollars),” Statista, last accessed June 12, 2018.)

This could include a 474% increase in sales of legal recreational pot, plus a nearly threefold increase in medical marijuana sales, the bulk of which will probably come from California, a state so populous it has the world’s fifth-largest economy (only the U.S. as a whole, China, Japan, and Germany are bigger).

However, it’s important to remember that these forecasts are conservative. They are built around today’s marketplace, factoring in only states that have already legalized marijuana.

What they fail to recognize is that legalization is contagious. It spreads from state to state as lawmakers realize that marijuana taxes are a gold mine of untapped revenue.

Furthermore, there are 20 states where medical marijuana is legal but recreational marijuana is not. These states are halfway there. Over the next few years, I expect more of them to complete the journey to full-scale legalization.

Marijuana-Legalized States
State	Recreational	Medical	Legalization Year
Alaska	Legal	Legal	2014
Arizona	Illegal	Legal	2010
Arkansas	Illegal	Legal	2016
California	Legal	Legal	2016, 1996
Colorado	Legal	Legal	2012
Connecticut	Decriminalized	Legal	2010
Delaware	Decriminalized	Legal	2015, 2011
Florida	Illegal	Legal	2016
Hawaii	Illegal	Legal	2000
Illinois	Decriminalized	Legal	2013
Louisiana	Illegal	Legal	2015
Maine	Legal	Legal	2016, 1999
Maryland	Decriminalized	Legal	2014
Massachusetts	Legal	Legal	2016, 2012
Michigan	Illegal	Legal	2008
Minnesota	Decriminalized	Legal	2014
Montana	Illegal	Legal	2004
Nevada	Legal	Legal	2016, 2000
New Hampshire	Decriminalized	Legal	2017, 2013
New Jersey	Illegal	Legal	2010
New Mexico	Illegal	Legal	2007
New York	Decriminalized	Legal	2014
North Dakota	Illegal	Legal	2016
Ohio	Decriminalized	Legal	2016
Oregon	Legal	Legal	2014
Pennsylvania	Illegal	Legal	2016
Rhode Island	Decriminalized	Legal	2006
Vermont	Legal	Legal	2018, 2004
Washington	Legal	Legal	2012
West Virginia	Illegal	Legal	2017

So, we don’t actually know what the ceiling is for legal marijuana sales.

Analyst Take

No one is a bigger threat to marijuana legalization than Jeff Sessions. He’s been on a witch hunt for years. And ever since his appointment to the Attorney General’s office, investors have been terrified of a crackdown on U.S. marijuana sales.

Those fears came to fruition earlier this year when Sessions reversed a Barack Obama-era memo telling federal agencies to back off from cracking down on weed-friendly states. This was more than a shot across the bow; it was a punch to the face.

Sessions drew an arbitrary line in the sand. For some reason, he distinguishes between cannabis and alcohol/cigarettes, completely disregarding that the latter two kill more people in a month than marijuana does in a year.

I had scaled back my hopes for the U.S. marijuana market when Sessions was appointed to the Attorney General’s office. I kept my expectations local, looking only at Colorado’s marijuana sales, or California’s, or Washington’s.

But President Trump’s comments could change all that.

I don’t care what Trump’s motivations are. It doesn’t matter to me whether his support stems from a dislike of Jeff Sessions. So long as it results in passage of the Gardner-Warren bill, I’m calling this one a win for the marijuana industry.