Are The Feds Waging War on Weed?
For campy amusement this past weekend, I re-watched the cult classic Reefer Madness (1936), an infamous anti-marijuana propaganda film. Advocates of marijuana normalization have embraced the film as unintended satire. It’s apropos, considering the topic of today’s e-letter, to share this snippet of dialogue from the movie:
FBI official [referring to a newspaper clipping]: “A fifteen-year-old lad apprehended in the act of staging a holdup. Fifteen years old, and a marijuana addict. Here is a most tragic case.”
Doctor: “Yes. I remember. Just a young boy under the influence of drugs, who killed his entire family with an axe.”
Old prejudices die hard, especially in federal law enforcement.
Recent case in point: A Department of Justice (DOJ) whistleblower testified in Congress on June 24 that resources were improperly deployed to scrutinize and ultimately hamper marijuana industry mergers, due to Attorney General William Barr’s bias against legalization.
At the House Judiciary Committee hearing, the whistleblower revealed that there wasn’t a justifiable basis for the DOJ probes, which currently comprise one-third of the Antitrust Division’s cases and caused cannabis companies to submit nearly 6 million documents for agency review. Career staff had recommended against reviewing the transactions but were overruled by political appointees.
In a July 1 letter to top lawmakers in Congress, a DOJ official explained that those actions were intended to ensure consumers have affordable access to products in a competitive cannabis market.
In the letter, DOJ Assistant AG for the Antitrust Division Makan Delrahim wrote that controversial government investigations of marijuana industry mergers are “consistent with protecting consumers’ access to cannabis products, not with animosity toward the industry.”
Delrahim elaborated: “In particular, the Division was forced to consider whether the antitrust laws could or should be applied to protect and promote lower prices and increased output of a substance that is facially illegal under federal law. Ultimately, the Division determined, in consultation with others in the Department, that it should analyze proposed transactions in that industry to determine whether ‘the effect of such acquisition may be substantially to lessen competition,’ as required under” federal law.
The justification expressed in the letter seems disingenuous (at best). However, the letter’s conciliatory tone is a concession to marijuana’s growing popularity as well as economic importance.
Meanwhile, the “weed wars” rage on. On July 20, the DOJ asked a federal court to force the California Bureau of Cannabis Control to comply with a U.S. Drug Enforcement Administration (DEA) subpoena for information on marijuana businesses’ licenses and shipping manifests. California has been resisting the DEA’s efforts. Marijuana is clearly getting singled out, if not persecuted, by the feds.
The persistent prohibitionists…
AG Barr is well known to be a social conservative with anti-marijuana views. The DOJ’s attempts to stymie marijuana industry consolidation is a reminder that the pot prohibitionists haven’t waved the white flag just yet.
U.S. Senator Mike Rounds (R-SD) vowed in an op-ed piece published July 17 that the Senate won’t include “promotion of cannabis” in its next coronavirus relief bill.
U.S. House Minority Leader Kevin McCarthy (R-CA) has repeatedly voted against laws favorable to marijuana. When Republicans ran the House, McCarthy’s opposition to marijuana legalization slowed the momentum for cannabis reform in Congress.
However, pot reform currently enjoys far better odds, with marijuana-friendly Democrats now controlling the chamber. Indeed, we’re witnessing the most pot-friendly Congress in history.
Several bills are pending in Congress that would remove federal restrictions on marijuana. Notably, U.S. Senator Cory Booker (D-NJ) recently reintroduced legislation to legalize marijuana nationwide and expunge federal convictions for possession or use of the drug.
But marijuana legalization isn’t moving in a linear, unimpeded fashion. Social change of this magnitude rarely does. Investors should brace themselves for bumps along the way, as anti-marijuana forces mount rear guard actions.
Make no mistake, anti-pot crusaders will probably prove unsuccessful in putting the genie back into the bottle. By the time all the votes are counted in November 2020, several more states are likely to have legalized marijuana to one degree or another. As increasing numbers of states legalize marijuana, it’s only a matter of time before the federal ban is lifted.
Marijuana is a jobs-generator. What’s more, localities are becoming addicted to the tax revenue from pot and Congress knows this fact of life. Most lawmakers don’t want to end the tax revenue gravy train.
This tweet posted on July 20 by Pennsylvania lieutenant governor John Fetterman summarizes the majority view in the United States on marijuana:
But as the controversy over the DOJ’s Anti-Trust actions shows, marijuana investors should remain informed about the industry’s ever-changing laws and regulations, because they tangibly affect pot stocks. The federal roadblocks to marijuana mergers come at a perilous time for the industry, as cash-starved and debt-ridden canna-businesses attempt to reduce costs and enhance economies of scale through the acquisition of competitors.
Consolidation is a healthy trend for the marijuana sector, which underwent a brutal correction in late 2019. Getting the DOJ out of the way probably will require a new presidential administration. Stay tuned.
In the meantime, marijuana remains one of the greatest investment opportunities you’ll see in your lifetime. The key is picking the right pot stocks. The good news is, we’ve done the homework for you. For our special report on marijuana investments, click here now.
Questions or comments? Drop me a line: firstname.lastname@example.org
John Persinos is the editor-in-chief of Marijuana Investing Daily.