The Post-Election Landscape for the Cannabis Industry

As Republicans continue to battle the results of the 2020 presidential election, and down ticket elections for house and senate seats continue, there are no clear winners except for one particular group: the cannabis industry.

In several states, the question of legalization of recreational marijuana was posed and it passed with flying colors in Arizona, Montana, South Dakota and New Jersey, with medical use being okayed in Mississippi and South Dakota.

This clear mandate is an indicator of the normalization of cannabis use throughout the United States. And with states like New Jersey getting on board, there is a good chance that New York will follow. Why? Because the will of the people will push legislators in New York to consider it. It wouldn’t be a big leap, as New York already has a medical marijuana program, but if they flip, the bulk of the U.S. northeast will be on board.

In fact, there are only 15 states in the country that outright outlaw marijuana consumption, both medical and recreational. That leaves a clear position that the industry is growing and becoming more of a reality in every part of the country.

Cannabis is being normalized in everyday society at an unprecedented level. The results of this election could be the point where recreational use of marijuana becomes like alcohol and cigarettes: just a normal part of society. Unlike those other two widely available and legal options, more and more people are seeing the benefits of cannabis as an effective way to manage stress and anxiety, help people relax and sleep, and in general, contribute to their wellbeing.

Part of the reason this is becoming more mainstream as a concept is that there are new ways to consume cannabis that don’t involve inhaling. Everything from edibles, transdermal solutions, and nano-technology for transference are becoming more widely available. So while smoking is becoming a little more taboo in much of society due to its effects on lung health, the options that are available for cannabis consumption are helping to push its normalization.

As these options grow and consumers ask for them from state to state, the federal government will eventually have to take notice. Just looking at the taxation benefits for state coffers might be an incentive, but time will tell on that.

In the same way that states are heavily dominated by one party or the other, so will the view of cannabis continue to be. Different states view it differently, and that does tend to run along party lines. Republicans are more cautious about legalization in general and, as long as they control the Senate, there probably isn’t much chance of federal legalization coming to be.

That said, President-Elect Biden has in the past been on record as against the federal legalization of marijuana, but there are signals that a Biden-Harris White House might look more favorably on the idea than ever before. Of course, it is a little bit like opening the barn door wider when most of the cows have already left, but better late to the party than never!

Vice-President Biden, while working with President Obama, had the opportunity to legalize cannabis federally but didn’t favor it. However, Biden’s tone has changed during his campaign and he has included cannabis decriminalization to his platform. What is also clear however is that the Biden-Harris administration is going to be pretty busy in the first 100 days and beyond of their term, dealing with issues that naturally need to take precedence over pot: COVID-19 and the economy, for example.

If the Biden-Harris administration does go to greater lengths to decriminalize marijuana, there also could be some downstream issues to their doing this by rescheduling marijuana rather than opting for a larger, federal legalization effort. At this point in time, cannabis is a Schedule 1 drug on the books. The new occupants of the White House can’t unilaterally remove cannabis from the schedule classification system, but they could reclassify it so that the effects of using marijuana recreationally no longer come with the same penalties.

According to some, a reclassification of cannabis might not be an ideal solution, It’s generally understood that rescheduling weed would blow up the marijuana industry’s existing business models. Biden rescheduling cannabis “would only continue the state-federal conflict, and force both state regulators and businesses to completely reconfigure themselves, putting many people out of business and costing states significant time and money,”wrote Morgan Fox, chief spokesperson for the National Cannabis Industry Association.

Will Biden and Harris spend any of their early day political capital dealing with the legalization of recreational marijuana at a federal level? Probably not, but their signals to being open to it are encouraging for the industry, on the whole.

Ultimately, it’s up to Congress to make the decision to change the legalization of cannabis at the federal level. Even the Supreme Court has chosen not to hear cases involving legalization, leaving it in the lower courts with the only option being for the issue to be dealt with in Congress.

President-Elect Joe Biden has promised to tackle criminal justice reform, including marijuana laws, and Vice President-Elect Kamala Harris was an early supporter of the MORE Act, which would lay the groundwork for federal decriminalization by expunging marijuana convictions, writes Marketplace.

No matter what happens federally, the states would still need to agree on issues such as  possession, transportation, and taxation for the industry to continue to evolve and grow.

With public support for the legalization of marijuana growing, cannabis companies will eventually be a part of many mainstream portfolios. For the time being, investment in the industry should still be viewed with a long-term lens, as there is a healthy market that is growing but which could ultimately face some shorter term regulatory hurdles, depending on where companies operate.

Ultimately, the timing of investment, as with any company, depends on the stock performance and overall corporate standing of each company. Investors need to evaluate their own interests and objectives, as well as their risk tolerance, before moving forward with any investment and the same is true of investing in the cannabis industry.

It does seem like short term returns in this market defy speculation. There are simply too many factors that could affect short-term success. However, when you add in the fact that the United States is currently in the middle of a transition of power, as well as the fact that the cannabis industry is evolving around the world, it’s definitely a longer term investment worth considering.

It’s entirely likely that bigger players will start to come to the table, expanding by acquiring smaller operations and businesses and creating a template for future entrants into the industry. Ultimately, the continuing growth of this industry seems to clearly show that a positive direction is the only way for it to go.