Marijuana stocks are surging while cannabis industry supporters remain optimistic but skeptical days after a surprise pledge from President Donald Trump that he will support state marijuana programs.
“Today, we can all rest a little easier if we’re in the industry,” said David Dinenberg, chief executive of KIND Financial, a Los Angeles maker software for cannabis businesses.
“Whether there will be real change, we still have to wait and see.”
Sen. Jeff Sessions, R-Ala. listens at left as then-Republican presidential candidate Donald Trump speaks during a national security meeting with advisers at Trump Tower in New York. (AP Photo/ Evan Vucci, File)
Sen. Cory Gardner, a Republican from Colorado, on Friday announced Trump had committed to support legislation codifying state rights to legalize and regulate the cannabis industry. That position is in line with what Trump said on the campaign trail, but he’s been silent on the issue as president.
Since his inauguration, Trump has let U.S. Attorney General Jeff Sessions speak for the Trump administration about cannabis. And Sessions has been both vocal and active in his disdain for legal marijuana, undoing past Department of Justice policies that protected state cannabis rights and encouraging other legislators to do the same.
That’s a major reason why Rep. Dana Rohrabacher, R-Costa Mesa, and Rep. Lou Correa, D-Santa Ana, are both continuing to pursue separate legislative fixes to the conflict between state and federal cannabis laws.
And Sessions’ harsh stance, combined with Trump’s tendency to surprise everyone, is why many California cannabis industry leaders say they’re taking the President’s promising pledge with a grain of salt.
The conflict
Nine states, including California, have legalized recreational cannabis. And 29 states permit medical marijuana. But marijuana remains illegal under federal law, which still lists it as a Schedule I drug, on par with heroin.
Through early January, an Obama-era policy offered legal marijuana states some protection from federal prosecution. The Cole Memo, issued by Deputy Attorney General James Cole in August 2013, stopped federal officials from prosecuting individuals and businesses in legal marijuana states if they were taking certain steps to keep cannabis from getting to kids and the black market.
But on Jan. 4, just three days after California launched legal recreational marijuana sales, Sessions repealed the Cole Memo. That gave U.S. Attorneys in each state the authority to prosecute residents for marijuana crimes as they see fit.
Related: How California leaders are fighting back against Sessions’ marijuana crackdown
That decision didn’t trigger raids on California marijuana stores, and evidence of a federal crackdown on state-legal cannabis businesses has not emerged. But Sessions’ move appears to have dampened the fast-growing industry, with the financial publication Green Market Report noting that an index of 30 publicly traded cannabis companies it tracks fell by nearly 22 percent in the first quarter of 2018.
The good news
When news broke Friday that Trump had promised to support state marijuana rights, many industry leaders said they were pleasantly surprised.
“By supporting this law, President Trump has arguably done more to advance the growth of the regulated cannabis industry than any other President,” said Isaac Dietrich, founder of the cannabis-oriented social network MassRoots.
A week ago, Aaron Herzberg, a cannabis industry attorney who’s part owner of two Santa Ana dispensaries, said he wouldn’t have predicted any progress under the Trump administration in terms of narrowing the conflict between state and federal cannabis laws. He thought the industry just needed to “button down the hatches” and survive.
Now, Herzberg’s view has changed. “There’s reason to be very optimistic that we’re going to see some movement.”
The news caused an immediate bump in marijuana stocks, which rose 8.8 percent in the final hours of trading Friday.
“Looking ahead to the second quarter, the stocks are already beginning to recover,” said Debra Borchardt, CEO of Green Market Report.
The market was no doubt bolstered by other good news in the world of weed last week.
Former Republican Speaker of the House John Boehner on April 11 announced that he has changed his mind about opposing marijuana legalization — a stance he held throughout his tenure in public office. Boehner is now touting the potential of medical marijuana to help veterans. And he said he’s joined the board of a large cannabis company, Acreage Holdings.
The next day, on April 12, Senate Majority Leader Mitch McConnell, R-Kentucky, introduced a bill that would legalize industrial hemp — a variety of cannabis that can’t get anyone high but is used to make fabric, building materials, nutritional supplements and more.
“Clearly the Republicans are on the bandwagon,” Herzberg said. “Frankly, the Democrats have been underwhelming on this issue.”
But he noted that public sentiment has strongly shifted just since Trump took office, with polls showing even a majority of Republicans now favor legal marijuana and oppose federal interference in state cannabis programs. So, while it may be largely a matter of being in the right position at the right time, Trump is poised to go down in history books as one of legal marijuana’s key advocates.
Uncertainty remains
Still, Dinenberg said nothing has actually changed for the marijuana industry since Friday. Banks haven’t stepped up to start serving the industry. There hasn’t been a flood of new investment dollars or licensing applications.
One problem, Herzberg noted, is that there hasn’t been any official announcement of Trump’s position on the issue or policy direction from his administration.
Gardner touted Trump’s over-the-phone promise, which first was made to a Washington Post reporter and, later Friday, confirmed by White House officials during a press conference.
“A secondhand report of the President’s word on a phone call is nowhere near what is needed here,” agreed Derek Riedle, publisher of “Civilized,” a cannabis industry magazine. “Until there is formal legislative change or direction, similar to the Cole memo, the cannabis industry will remain skeptical.”
Listen starting at the 21-minute mark to reporter Brooke Edwards Staggs chat with Doug McIntyre, host of KABC 790 radio’s “McIntyre in the Morning” show, about Trump’s pledge to support state cannabis rights.
Others pointed to Trump’s track record of changing his mind on major policy issues, such as bombing Syria and supporting the Trans-Pacific Partnership.
“He has failed to stay true to really anything he has said on just about every subject thus far,” said Jason Santos, CEO of the soon-to-launch streaming cannabis network BurnTV.
“So what happens when he needs to win favor with someone else, after this, who is (in favor of) prohibition?”
Everyone is also waiting to see what Gardner’s Trump-backed legislation will actually look like.
The bill is being pitched as a permanent replacement for the Rohrabacher-Blumenauer amendment (known as the Rohrabacher-Farr amendment when it was introduced in 2014). That budget rider blocks federal funds from being used to prosecute medical marijuana cases that are legal under state law. But it has to be renewed each year along with the federal spending bill, and it’s currently set to expire Sept. 30.
Presumably, Gardner’s bill will extend existing medical marijuana protections to states’ recreational marijuana sectors. But will it also tackle an obscure tax law that bars marijuana business owners from writing off typical expenses? Will it address the industry’s lack of access to major banking services? And will it downgrade or remove marijuana from the federal government’s list of scheduled drugs? There are a lot of unknowns.
Dinenberg fears that legislators are going to rush through a bill that doesn’t comprehensively address these issues. And he wonders if they’d be better off waiting until 2019, when Democrats might have a stronger position and could pass legislation that wouldn’t require as many compromises to appease Republicans.
“This could be the start of something special,” Dinenberg said.
“This could also be the start of a disaster.”
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