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The booming legal marijuana industry is predicted to eclipse $35 billion in revenue by 2020.
To put that in context, the entire newspaper publishing industry generates $38 billion in revenue and the confectionary industry generates $34 billion per year. Indeed, the black market for marijuana is estimated to be as large as $120 billion per year, and the legal market could capture all of that in time if voters allow it.
But marijuana investors have waded into perilous territory, a segment of stocks that trades with a constant cloud hovering over its head.
That cloud is born out of the federal ban on marijuana. And while many states have begun to relax their attitudes towards marijuana – at least marijuana for medicinal purposes – the federal government has not.
That may have all changed recently.
In the most recent federal spending bill, the bill that kept the government from shutting down at the last minute (yet again), a single sentence may have signaled the “all clear” for marijuana investors. In the 2014 Continuing Resolution Omnibus bill, containing over 1,600 pages of language, there is one sentence in particular that looks to me like a huge victory for the marijuana industry.
That sentence essentially stripped the Department of Justice’s ability to pursue action against companies operating within the legal limits of their respective states’ laws but, of course, outside of the federal ban on marijuana.
The sentence reads:
None of the funds made available in the Act to the Department of Justice may be used, with respect to the States of Alabama, Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Washington, and Wisconsin, to prevent such states from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.
For those of you trying to keep count, that’s 32 states and Washington, D.C. that may now operate medical marijuana systems without fear of prosecution from the Department of Justice. And, as it pertains to marijuana investors, that’s the District of Columbia and 32 states where companies in the industry can continue to operate without fear of prosecution or of being shut down by federal authorities.
For a company like Surna (OTC: SRNA), a marijuana services company I recently highlighted, that means that we don’t need to worry about whether its customers will suddenly disappear because of federal prosecution.
Of course, the sentence from the spending bill explicitly mentions the medical marijuana industry and doesn’t necessarily prevent the Department of Justice from targeting companies profiting from the recreational marijuana market in Colorado and Washington.
But this certainly signals an “all clear” when it comes to the federal regulatory risk for medical marijuana stocks. And I’d argue that it sends a clear message from Congress to the Department of Justice to leave states alone.
As investors we always try to understand and manage our risk. And as marijuana investors, the risk that the federal government – specifically the FBI or DEA – could show up one day and shut down the entire industry has been looming large.
This recent development signals to me that marijuana investors can breathe a huge sigh of relief, particularly investors in medical marijuana stocks.
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