Last week’s announcement that the US Department of Justice was ditching its hands-off approach to US states that have legalized marijuana initially sent some in the industry into a tailspin, just days after California’s US$7 billion recreational weed market opened for business.
However, for long-term pot purveyors accustomed to changing regulatory winds, the decision was just another bump in a long and winding road to proving their business legitimacy.
Many in the industry said they are keeping a wait-and-see attitude because the effects of US Attorney General Jeff Sessions’ announcement depends on whether federal prosecutors crack down on marijuana businesses operating legally under state laws.
Sessions provided no details other than saying individual US attorneys are authorized to prosecute marijuana operators as they choose.
Stocks of publicly traded marijuana-related companies on Thursday plunged after Sessions announced the department’s new policy.
On Friday, though, many of those stocks recovered.
“The announcement was largely symbolic,” said Patrick Moen, general counsel of Privateer Holdings, a Seattle-based venture capital firm that invests in marijuana businesses. “This kind of stunt will not have a substantial effect on the industry.”
Moen said Sessions’ action does not change federal law, which includes a congressional provision barring authorities from spending federal money to prosecute medical marijuana operations that abide by state laws.
He conceded that the action would have a “near-term chilling effect” on the industry’s lobbying effort to compel banks and insurance companies to accept its business.
Banks and insurance companies refuse to do business with cannabis companies because marijuana is illegal under federal law and most financial institutions are federally insured, forcing marijuana businesses to operate in cash.
Most of Seattle-based Privateer’s US$150 million in investments are in companies based outside the US, and Moen conceded that Sessions’ action would keep it that way for the short term because of regulatory uncertainty in the country.
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