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Why Jeff Sessions' New War on Marijuana Hasn't Frightened Investors or Cannabis Entrepreneurs

The Attorney General's new policy to resume unbridled federal enforcement of marijuana laws has inadvertently revealed just how entrenched the cannabis industry has already become.
Why Jeff Sessions' New War on Marijuana Hasn't Frightened Investors or Cannabis Entrepreneurs
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Guest Writer
Cannabis Journalist | Tech Evangelist Covering High Growth Trends
13 min read
Opinions expressed by Green Entrepreneur contributors are their own.

Someone’s always gotta’ try and ruin a good party. Last week it was Jeff Sessions.

Californian’s were granted the long-awaited right to possess cannabis for both medical and now recreational purposes and the world watched vicariously for a whole four days until someone knocked over the punchbowl.

Jeff Sessions announced a suspension of the Obama-era Cole memo granting states a reprieve from Federal interference in state cannabis laws. Sessions, against all scientific evidence, asserted that "Marijuana is a dangerous drug and ... marijuana activity is a serious crime."

That’s akin to flipping on the lights and queuing up your turntable with “Dust in the Wind” by Kansas five minutes after midnight -- it doesn’t necessarily end the party, but it gives people time to step away from the dancefloor long enough to consider going home early.

And that’s precisely what some investors are doing.

While many are running, however, doing so may be unnecessarily reactionary. There are a variety of reasons for holding tight or even growing investment in U.S. cannabis stocks and companies.

Related: You Can Legally Buy Marijuana in California But Selling It Legally Is Tricky

Bipartisan backlash

This White House has made a host of arguably questionable moves in its first year that, for the most part, congressional Republicans have overlooked. But this move is generating bipartisan rebuke.

Advocates and Democratic leaders from states that have legalized marijuana, in particular California and Colorado, unabashedly voiced their dismay at the news. In addition, some Republican lawmakers are joining suit, claiming Sessions rescinding the Cole Memo is in direct contradiction with promises he made to them before being confirmed as Attorney General and that Trump made while campaigning for the presidency.


Republican Senator Cory Gardner of Colorado called the Sessions move “a trampling of Colorado’s rights.”

"Why is Donald Trump thinking differently than what he promised the people of Colorado in 2016?" Gardner said in a speech on the Senate floor, Bloomberg reported, referring to Trump’s campaign promise to let states decide the issue of marijuana legalization. "Thousands of jobs at risk, millions of dollars in revenue, and certainly the question of constitutional states rights -- very much at the core of this discussion."

In Nevada, a state that legalized recreational cannabis in 2017, Governor Brian Sandoval said, “I believe Nevada's marijuana industry is a model for other states. My staff and I will review the memo that was released this morning and our state options. I look forward to the appointment of the new Nevada United States Attorney and further guidance that will be provided by the Department of Justice.”

Related: California Unleashes a Massive Market for Legal Cannabis

In Alaska, Republican Sen. Dan Sullivan said the suspension of the Cole memo contradicts previous statements by candidate Trump, but at the same time, could drive Congress to no longer ignore finding a permanent solution for states that have chosen to regulate marijuana.


Republican legislators like Gardner, Sandoval, and Sullivan are putting voters rights before party allegiance because support for legalization has been strong across the country and in their states. "Regardless of Sessions’ idiotic and antiquated views, better than 60 percent of Americans support cannabis legalization,” Tim McGraw, CEO and founder of cannabis real estate development and property management company, Canna-Hub shared in a written statement.

McGraw believes states will continue to pass laws that remove barriers to the world’s safest and most effective medicine but advises, “Investors should take the necessary precautions to ensure they are aligning themselves with sophisticated operators who are compliant with state law,” McGraw continued. “As long as companies remain compliant they should be safe from federal interference."

There’s also the little-known but bipartisan Rohrabacher-Blumenauer (formerly Rohrabacher-Farr) amendment that forbids the Justice Department from using any resources to interfere with the provision of medical marijuana in states that have legalized it, and has to be included in federal spending proposals when being considered for law.

If Congress doesn't include it in future federal spending bills, the DOJ would be free to use federal dollars to prosecute marijuana businesses. But, it’s expected to be renewed in January, further protecting states.


My hunch is conservative legislators, acutely aware of the law’s intent to preserve the cannabis industry, are unwilling to argue against it. By several accounts, this bipartisan cohesion will necessarily elevate cannabis criminalization from a state conversation to an openly federal one.

“What’s going on right now is going to accelerate further reform...The public is behind us,” Rep. Earl Blumenauer, a Democrat representing Portland, Oregon, told Politico last year. “Both chambers of Congress are behind us, and if they choose to make it a partisan issue, it won’t go well for them.”

"I don't believe many people in government have an appetite to resume the war on drugs when it comes to cannabis,” explained Jamie Warm, CEO and co-founder of Mendocino’s premium cannabis grower, Henry's Original in an email interview. “Revenue is being generated, and local and state government institutions are now becoming reliant on that revenue.”

His company produces Clean Green Certified products including pre-rolls, pre-packaged flower, and bulk flower throughout California dispensaries.

“I believe now is actually the best time for people to invest if they find the appropriate investment," Warm wrote. "Looking for the appropriate investment is key, especially for companies that touch the plant. Pre-money companies are a greater risk and need to navigate a legal landscape that is expensive and full of landmines. Investors will need to find companies that have already done the work last year. And it’s imperative companies are positioned well with local governments, be in good standing, and have established political capital.”

Related: The Year Ahead: Cannabis Legalization in 2018

Tight budgets and low incentives to enforce.

By revoking the Justice Department’s previous guidance on marijuana, Sessions merely invited federal prosecutors to decide a legal course of action in cannabis-legal states. They may choose not to do anything.

“It is becoming clear that states are tired of helping the federal government enforce outdated and harmful marijuana policies and are ready to make this legal for adults,” Matthew Schweich, interim executive director for the Marijuana Policy Project, said in a statement.

Legal experts do not expect a flood of new cannabis prosecution cases, as resource-limited prosecutors could decide against seeking criminal charges against cannabis companies or consumers that abide by established state regulations

“There are higher priorities: terrorism and opiates to start with,” said Rory Little, a former prosecutor and a professor at the University of California Hastings College of Law. “You also have to draw the jury pool from the local people, who appear to generally support the state policy. You’re not going to waste your resources on cases you can’t win or cases your community is against.”

If state and local communities don’t direct their resources to a new war on cannabis, federal reach will only exacerbate the illicit market. States and localities won’t stand for that.


Related: Canada Is Creating a Multi-Billion Dollar Legal Marijuana Industry

Medical realities and revelations.

The evidence of a multitude of medicinal uses for cannabis is now widely available and undeniable. This is expected to continue to drive consumer demand for cannabis products regardless of political threats. States like Florida where medical marijuana laws have passed are experiencing strong consumer growth from new and emerging audiences now seeking alternative medicines.

Related: Doctors and Patients In Florida Are Embracing Medical Marijuana

"It's still a good time to invest in cannabis because the consumer demand will only get stronger,” Sari Gabbay, owner of Redefining Cannabis and Cannabliss Retreats asserted in a written interview. “The more people learn the truth about cannabis backed by research, the more the public will seek out the benefits of cannabis. The cat is out of the bag, and Sessions just fueled the fire even more."


“I have seen a great deal of compliance between state regulatory agencies and legal commercial cultivators to provide safe, well-managed cannabis crops to suffering people,” Marco Hegyi, CEO of GrowLife, Inc. related to me. His company, a recognized leader in hydroponic systems and supplies, knows these stringent compliance requirements first hand and understands the importance of meeting them.

“I believe the State governors from the 30 medicinally legal states will voice their concerns over the possible withdrawal of the Cole memo,” Hegyi wrote me. “If the White House Administration and US AG Sessions wish to help stabilize this industry, I believe solving the banking problems and the IRS 280e would be a better use of their resources.”

Related: The $5-Billion Challenge Medical Marijuana Poses to Big Pharma

Risk is ultimately met with reward.

According to some, cannabis investors have already, and inherently, factored risk into their investment activities. And those who’ve ridden out this sudden blip in their portfolio have quickly seen it recover. A day after the Sessions announcement cannabis markets rebounded and rallied.

“As evidenced by the immediate drop and then nearly full rebound of cannabis-related stocks after Sessions’ announcement, the market seems to feel that the actual risk of the DOJ enforcing the federal laws against the will of the people is small,” Ruth Epstein, partner at business and financial advisory firm, BGP Advisors relayed to me.

“The fact of federal illegality has been something that investors have historically factored into their decision-making, and it is unlikely that the Attorney General codifying his well-known desire to prosecute state legal cannabis enterprises will have a material impact on investor interest,” Epstein believes.

Dr. Stuart Titus, CEO of Medical Marijuana Inc. agrees low stock prices offer a prime time for investors to get into the country’s fastest growing market. His company was the first publicly traded cannabis company in the United States.

"Historically the market for cannabis stocks has been very volatile. Investors have done well to buy stocks when they are relatively out of favor (ie. this week) and sell when there is good news or cannabis legalization movement (ie. last week)," Titus said. "Overall if we ever got full cannabis legalization for medical usage (like Canada), we believe there would a huge rally in cannabis stocks. With Jeff Sessions' recent remarks and the opposition to his stance growing in Congress as well as in various States--like the remarks of Gavin Newsome, Lt Governor of CA--we are actually moving closer toward to legalization of cannabis for medical usage nationwide.”

Positive public stock earnings may further reassure cannabis investors in the strength of their portfolios. “Stock prices would presumably rally in February when many of the companies begin reporting their fourth-quarter earnings which should include the build up to the legalization of California’s adult-use marijuana market.” Debra Borchardt, Co-Founder, CEO and editor-in-chief of Green Market Report explained. “When those positive earnings are made public stocks will begin to recover.”

The Sessions move may serve to strengthen the evolving cannabis industry as a whole. “This development will undoubtedly have an at least temporary chilling effect, particularly on new investment and banking,” Nathaniel Gurien, CEO of FINCANN said. “However, it is also likely to drive marijuana-related businesses to higher levels of accountability and compliance, making their businesses less susceptible to targeted enforcement and overall more sustainable in the long run and this would be a positive outcome.”

This is to be expected from an emerging industry Glenn Ballman, CEO of düber Technologies told me in an email.  

“Ultimately things will have to normalize or the retailers will start to fail en masse... but by that time national brands will dominate and the hedge funds will be rolling up retailers and processors and producers - consolidating supply and following the normal trends that every new industry experiences," Ballman wrote. "For entrepreneurs that are acutely aware of this life cycle there are opportunities at every level - from little to no investment - gig economy work (home delivery drivers); to micro operations with small capital investment (ex., single vehicle couriers); to storefront retail operations and private label processing and packaging. The opportunities to become involved in the supply chain are too numerous to count.”

“The investors who can find California companies that are legally compliant and well-positioned in the market will see huge revenues in 2018 and 2019. And those companies will be poised for expansion as they consume market share,” Henry’s Original CEO, Ward concludes.


Former Wall Street stock and institutional equity derivatives broker turned cannabis industry consultant, Jackie McGowan may have summarized it best.

"This industry is not for the faint-hearted entrepreneur. If you're looking for a mentally stable investment, then this sector is not for you," McGowan said. "Each time this new administration steps in the way of the fastest growing industry in this country, investors pull out. This is nothing new. Every time this occurs it essentially creates a buyers market for those with a healthy risk appetite, and that is exactly what this is right now. There are some very attractive deals out there and it's exciting to offer these opportunities to a new round of capitalist cowboys that are ready to tame the wild west of cannabis. Now is the time to accelerate investment and capture market share.”

By Javier Hasse
From retailers to growers, producers, and suppliers, there’s a seemingly never-ending list of startup opportunities in this emerging market. In Start Your Own Cannabis Business, marijuana, biotech, and entrepreneurship reporter Javier Hasse introduces forward-thinking entrepreneurs like you to the industry and shares hard-earned tips and success stories from pioneers and visionaries in the marijuana industry.
Learn More

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