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by Jennifer Kaplan and Polly Mosendz
The cannabis industry was rattled after White House Press Secretary Sean Spicer said he expects the Department of Justice to increase enforcement of federal laws prohibiting recreational pot, even in states where it’s already legal.
Along with the District of Columbia, eight states have legalized recreational use among adults, including California, Maine, Massachusetts, and Nevada just this past November. That means one in five American adults can smoke, vape, drink, or eat cannabis as they please under state law. Meanwhile, more than half of the nation’s states have legalized medical marijuana despite federal laws prohibiting its sale. The industry is estimated to be worth north of $6 billion and will hit $50 billion by 2026, according to Cowen & Co.
“Today’s news coming out of the administration regarding the adult use of cannabis is, of course, disappointing,” Derek Peterson, chief executive officer of marijuana cultivator Terra Tech Corp., said yesterday in a statement. “We have hoped and still hope that the federal government will respect states’ rights in the same manner they have on several other issues.”
Spicer sought to distinguish the prospect of federal enforcement for medical, vs. recreational, cannabis use, saying, “there’s still a federal law that we need to abide by when it comes to recreational marijuana and other drugs of that nature.”
Spicer’s statements reanimated industry concern that first arose when Republican President Donald Trump’s short list of potential attorney general nominees emerged. The final pick, former U.S. Senator Jeff Sessions of Alabama, a Republican, has long opposed cannabis use but is a major proponent of states' rights. In his mid-January confirmation hearing, Sessions said he wouldn’t “commit to never enforcing federal law” but added that “absolutely it’s a problem of resources for the federal government.” He said that if Congress felt marijuana possession should no longer be illegal, it “should pass a law.” Trump has similarly gone back and forth on the issue of legalization.
The Bloomberg Intelligence Global Cannabis Index fell as much as 3.7 percent after Spicer’s press briefing.
A crackdown on the industry would reverse existing federal policy and go against public opinion. The Obama administration largely deferred to the states, focusing instead on preventing distribution to minors, blocking sales across state lines, and keeping marijuana out of the hands of gangs and criminals. A recent poll from Quinnipiac University found 71 percent of voters think “the government should not enforce federal laws against marijuana in states that have legalized medical or recreational use.”
The Drug Policy Alliance, a nonprofit organization that advocates for drug policy reform, cited the poll on Twitter in a reaction to Spicer’s statement. Of the more than 1,300 voters polled, 59 percent said marijuana should be legal in the U.S. Notably, Republicans opposed widespread legalization 61 percent to 35 percent.
Some in the cannabis industry see the federal reversal as a contradiction of the administration’s stated positions on states' rights and job creation.
“To have Mr. Spicer say in one sentence that they’re a states' rights administration and in the very next sentence say they’re going to crack down ... it just defies logic,” said Robert Capecchi, director of federal policies for the Marijuana Policy Project, an organization that lobbies for pot-friendly changes to drug-related legislation.
The industry is also an abundant source of revenue, according to Patrece Bryan, president of Cannabrand, a pot-focused marketing company. New Frontier Data says the cannabis industry will create more than 283,000 jobs by 2020.
“This is absurd. For a president who ran under the banner of job creation, he actually needs to start looking at where the jobs are being created,” she said. “With Colorado generating $1.8 billion over a 10-month period, this is America’s new agriculture. Why would we take this revenue away from our country?”
The Drug Policy Alliance echoed Bryan’s point, noting that eliminating part of the legal cannabis market would mean “wiping out tax-paying jobs and eliminating billions of dollars in taxes.”
Still, not everyone was frantic about Spicer’s comments. The tacit endorsement of medical pot use was comforting, said Allen St. Pierre, a partner at Strategic Alternative Investments, which focuses on marijuana. Ian Eisenberg, founder of Seattle-based pot retailer Uncle Ike’s, was also sanguine.
“After the feds learn how well regulated Washington’s adult use and medical cannabis markets are, they will leave it status quo,” he said. From July 2014 to April 2016, the state reportedly collected close to $200 million in tax revenue on cannabis.
Republican U.S. Senator Cory Gardner of Colorado, where pot is legal, said he was assured before Sessions’s confirmation that there would be no drastic changes to federal policy. “That was the take-away from my conversation with Jeff,” Gardner said. “It’s not a priority of the Trump administration.”
Other politicians in states where recreational use is allowed said they will act to protect the industry. “These comments leave doubt and uncertainty for the marijuana industry, stifling job growth in our state,” said Democratic Representative Jared Polis of Colorado.
Nevada Senate Majority Leader Aaron Ford, a Democrat, said his state’s attorney general “must make it immediately clear that he will vigorously defend Nevada’s recreational marijuana laws from federal overreach.”
Given the size and growth trajectory of the industry, entrepreneurs are not going to shut their doors without a fight, warns Troy Dayton, CEO of Arcview, a cannabis market research company.
“People don’t respond well to having freedom taken away,” Dayton said.
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