RBC Capital Markets, a global investment firm, released a message to its clients that is bullish on marijuana. The message states: “The legal cannabis category [in the U.S.] is set to grow at a 17% CAGR over the next decade to as much as $47 billion in annual sales (this compares to the current diaper category at $4 billion in sales).”

Currently, four states have legalization measures on the ballot in November. And in only four states—Idaho, Kansas, Nebraska, and South Dakota—are marijuana products, including CBD, prohibited for any use. Adult use is legal in nine states, and medical cannabis is legal in thirty. One recent poll showed that, for the first time, a slim majority of Republican voters support legalization, and a solid majority of all voters do as well. What has kept marijuana in the diaper category, however, is that marijuana remains illegal under federal law, making the industry’s relations with banking and investment difficult.

The Federal Block

Attorney General Jeff Sessions is a longstanding opponent of legalization. He rescinded the Cole memo, which was issued under the Obama administration and authorized a hands-off policy regarding federal enforcement in legal states. President Donald Trump has made some offhand statements favoring a relaxation in federal enforcement, but there is no indication that he has directed Sessions to reinstate the memo or otherwise change federal law enforcement policy toward marijuana.

Moreover, BuzzFeedNews recently broke the story that the Trump administration organized a secret Marijuana Policy Coordination Committee that advised many federal agencies, including the DEA, to prepare two-page reports on the “threat” of marijuana to the “health, safety, and security” of the nation. The committee was clearly looking for as much negative information on marijuana as the agencies could provide. Because the administration has not offered information on the committee, its members and backers are unidentified. Various sources, however, have reported on the groups or industries that have lobbied against legalization. They are pharmaceutical companies, police unions, private prisons, liquor, and tobacco.

According to the message, if the marijuana industry in the United States amounted to some “$50 billion,” it would compare to “spirits $58 billion, wine $65 billion, and beer $117 billion.” The message also praised Constellation Brands for investing in Canopy Growth, a marijuana company. Constellation Brands businesses include Corona and Modelo beers, among other alcohol brands. After Constellation Brands increased its investment in Canopy Growth, its stock surged. Various large tobacco companies have also invested in or bought marijuana companies. In April, Former House Speaker John Boehner, a Republican, announced via tweet that he was “joining the board of #AcreageHoldings”–a marijuana firm–“because my thinking on cannabis has evolved. I’m convinced de-scheduling the drug is needed so we can do research, help our veterans, and reverse the opioid epidemic ravaging our communities.”

Thus, while groups and industries opposed to legalization still have the ear of the Republican administration, some of them are evolving, to use Boehner’s word, and making investments in the marijuana industry that reasonably anticipate federal legalization. As the message puts it: “We believe further US decriminalization of cannabis including for recreational use is very likely over time. It ultimately starts with US voters who across demographics are supportive of cannabis legalization.”

What do you think? Is the RBC Capital Markets message on point? Leave a comment below.

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