The $53 Billion Case for Legalization
The grass is looking greener for marijuana investors.
President Trump has marijuana investors nervous. But he also has the potential to make marijuana more mainstream than ever before. We’ve seen Trump’s “X-Factor” pump up some investments – and dump others.
So what’s his deal with weed?
First of all, marijuana investors have good reason to be nervous. Trump’s new attorney general is Jefferson Beauregard “Jeff” Sessions III. He’s the junior senator from Alabama. And he hates marijuana.
There’s a famous story about Jeff Sessions from when he was a U.S. attorney in Alabama in the 1980s. One of his former prosecutorial colleagues testified to Congress that Sessions said he thought the KKK “were OK until I found out they smoked pot.”
Beyond that, Sessions has famously said, “Good people don’t smoke marijuana.”
And Sessions isn’t the scariest anti-marijuana crusader in the Trump administration.
Trump’s Health and Human Services secretary is Georgia Representative Tom Price. He is an anti-marijuana zealot. By that I mean he voted three times against allowing America’s military vets access to marijuana through the Department of Veterans Affairs… Even when doctors and veterans pleaded for Price to do otherwise.
Price also voted against a budget bill specifically because it froze Justice Department actions against marijuana businesses that were “state legal.” That is, the businesses followed the laws of their states.
Okay, those two gentlemen are the obstacles. Now here are good reasons why Trump could overrule his advisors and open the door to full legalization.
Greener on the Other Side
I’ve told you that Trump is following through on his campaign promises. And one of his promises is that he will be America’s “jobs president.” Keep that in mind while I share this next stat: The American marijuana industry employs 100,000 to 150,000 people nationally.
Is that surprising? How about this? The coal industry employs only 86,035 Americans. And President Trump has promised to save those jobs.
It’s a lot easier for President Trump to be the jobs president if he doesn’t wipe out a legal industry with the stroke of a pen.
A $53 Billion Market
Last year, legal marijuana spending was $6.9 billion, according to market research firm The Arcview Group. And this was the case even though marijuana still isn’t legal in many states and is restricted in many more.
By 2021, sales should reach $21.6 billion.
Taking into account both legal and illegal sales, the total North American marijuana market topped $53 billion last year. Illegal sales took in 85% of the revenue.
If marijuana is fully legalized, that would be a river of cash. And that would mean a windfall for hard-pressed states.
Colorado, the poster child for legalization, earned about $61 million in revenue from taxes on marijuana last year.
Oregon also earned about $60 million last year, its first full year with legalized weed. And the state of Washington expects to rake in about $730 million from sales of legalized marijuana over the next two years.
So states may put a lot of pressure on President Trump to accelerate legalization.
Here’s another interesting point: Legalizing marijuana in the U.S. is kicking the Mexican drug cartels right in the cojones. In 2008, Mexico supplied two-thirds of the marijuana consumed in the U.S. More recently, that has fallen to less than a third.
Finally, a whopping 60% of Americans favor legalization. Importantly, 42% of Republicans support legalization, up from 20% in 2005.
This tells me that while Trump won’t risk alienating his base by supporting legalization, he might alienate some Republican lawmakers. But that hasn’t stopped him in the past.
In fact, he’s made it known that he nominated Sessions for his tough stance on immigration – NOT for his views on pot.
And in speeches on the campaign trail, Trump said he favored leaving marijuana up to the states. Again, he has a habit of keeping his campaign promises.
Three Paths for Trump
The way I see it, President Trump could do one of three things.
He could unleash Sessions and Price to enforce federal anti-marijuana laws. They could then raid dispensaries and greenhouses and bust budding pot entrepreneurs.
I find that very unlikely.
Trump could also opt for a “steady as she goes” approach. He could keep a tight leash on Sessions and Price and let the states do what they want.
Does Trump look like a guy who flinches from doing what he thinks is right? I don’t think so.
That brings us to option three: Pursue legalization. There are sound fundamental conservative reasons for legalization.
Some examples: Patients and doctors are clamoring for medical marijuana. We need to stop fighting a lost war. We want to hurt the Mexican drug gangs. Marijuana is a fiscally responsible industry. And it ushers in a new era of personal responsibility.
So I think Trump will pursue legalization. If he has too much on his plate – and he might – then he’ll do nothing. But I don’t see him cracking down on weed.
I’ve talked about potential pot investments in the past (here and here). If you’re interested, it might be a good time to revisit those. The great green rush is coming. And you can make the most of it.