Investors sour on cannabis after Democrats fail to help industry

One major reason for the financial slump is that Congress and the Biden government have done nothing to ease marijuana restrictions, even though the Democrats have complete control over the federal government.

The final blow: JPMorgan Chase’s decision to stop accepting some cannabis trades from broker clients, as Reuters reported for the first time on Tuesday. This is on the heels of the Credit Suisse Group make a similar announcement.

“The banks see what I do that there will be no legalization of cannabis in the next six to twelve months,” said Marc Adesso, a lawyer at Saul Ewing Arnstein & Lehr who works on big deals in the cannabis industry.

All of this leads to a notable reversal since the beginning of the year, when optimism rose in the cannabis industry after the Democrats took control of the Senate. Investors poured into the industry. Cannabis giants have raised billions in capital to fund expansion plans. Share prices soared.

But the Democrats didn’t pass any laws in the next 10 months – and the prospect of change anytime soon is a long way off.

The industry’s biggest immediate demand is for legislation to be passed that would make it easier for cannabis companies to access banking services and raise capital.

“The banks are conservative beasts,” observed Paxhia. “We’re not asking about the moon here.”

The House of Representatives passed the SAFE Banking Act twice by large bipartisan majorities. But it didn’t go anywhere in the Senate. And key Democratic lawmakers – including Senate Majority Leader Chuck Schumer and New Jersey Senator Cory Booker – felt that banking laws shouldn’t be passed unless they involve much broader changes to state cannabis policy.

But a far-reaching blueprint for legalizing cannabis that Schumer, Booker and Senator Ron Wyden (D-Ore.) Put forward over the summer was not put in place as formal law. Even if that changes, the chances of getting all 50 Democrats behind the plan – let alone the 60 Senators it takes to break a filibuster – are extremely slim.

“It was such a no-brainer,” said Adesso. “That didn’t go away.”

The cannabis sales boom that emerged as Americans settled down to weather the pandemic has also faded. In California, legal cannabis sales peaked this April of over $ 350 million before declining for five straight months, with sales falling below $ 300 million in September. according to the cannabis analysis company BDSA. Similarly, sales in Colorado topped $ 225 million last July but has plummeted since then, with sales just over $ 190 million in September.

Despite the gloomy market indicators, the long-term outlook for the cannabis industry continues to look positive. U.S. revenue hit $ 20 billion in 2020 – an increase of nearly 50 percent, according to New Frontier Data. Revenue is expected to reach $ 40 billion by 2025, powered by major new markets slated to go online in New York, New Jersey, and Virginia.

Longtime investors like Paxhia don’t panic.

“I have 99 percent of my net worth in this industry and I don’t care where we are today,” he said. “There are some of us who really see this as a 20-year horizon.”

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