Investors Optimistic With Marijuana Reform Bill

14On Tuesday (March 10), three senators announced a bill to reform federal regulation on marijuana, and pot investors are excited about it.

Sens. Kirsten Gillibrand (D., NY), Rand Paul (R., Ky), and Cory Booker (D., NJ) unveiled the proposal for the Compassionate Access, Research Expansion and Respect States (CARERS) Act. Its biggest proposed change is to reclassify cannabis into a Schedule II controlled substance, instead of its current classification under Schedule I. A primary difference is that Schedule II drugs may have “a currently accepted medical use” while Schedule I do not.

The proposal also seeks to amend the Controlled Substances Act so that states will be allowed to set their own policies on medical marijuana.

Business Angle

The senators pitched the bill not just in terms of states’ rights, military veterans, and health issues, but also of business. Their proposed changes would mean that banks and financial institutions can then serve legal marijuana businesses without the current risk of federal prosecution.

Currently, medical cannabis enterprises are struggling to find banks that would open accounts for them, because federal restriction on the herb makes banking institutions skeptical. This is in spite of the Treasury and Justice Departments’ 2014-issued guidelines allowing banks to serve cannabis businesses in states where they are legal.

During the press conference for the bill, Sen. Paul cited his recent trip to Colorado, one of the states that have legalized both medical and recreational marijuana. He said that the biggest request he has received from marijuana entrepreneurs in the state is for “banking to be legal.”

A cannapreneur also gave a pro-business statement during the bill’s news conference. Corey Barnette, owner and president of the Washington, DC-based medical cannabis cultivator District Growers LLC, said his company runs into several restrictions due to federal law. Among these are no direct working capital, no debt financing, and no credit or debit cards so the business could not do any transactions over the internet.

Barnette’s business is not the only one hampered by such restrictions. Federal law on cannabis has prevented some direct investment even from major firms. Privateer Holdings Inc, for example, is a large investment company with an active portfolio, but it has had to limit its cannabis US deals to ancillary businesses. One of these is Leafly, an online marijuana information and review resource.

Hopeful Investors

Privateer chief executive Brendan Kennedy expressed that his firm is “thrilled” for the bipartisan bill. He explained that it would create “the possibility of direct investment”, referring to companies that actually grow and handle marijuana and not just provide ancillary services.

Kennedy divulged that Privateer has looked at hundreds of marijuana growing or distribution companies in the US, but has not been willing to invest in them under current federal law. The firm has instead turned to Canada, where it operates a medical cannabis business called Tilray, based in British Columbia.

Privateer also made headlines last January when it received a multi-million dollar investment from high-profile venture capital firm Founders Fund. The investment put Privateer close to its $75 million fundraising goal, and spotlighted the marijuana industry as one that is becoming more and more legitimate.

Another investing company, Salveo Capital, is also keen on the bill. Managing partner Alex Thiersch lauded the proposal, saying “This is very, very encouraging.” It would open many doors for his firm to pursue, he said.

Salveo Capital is based in Chicago and is in the process of raising $25 million in funds to invest in cannabusinesses.

Investors, alongside marijuana advocates and other industry participants, believe that while other marijuana law reform efforts failed in Congress, this particular bill is more promising. For one, it is crafted to appeal to both cannabis decriminalization advocates and conservative proponents of veterans’ issues and states’ rights. In addition, the bill could allow cannabis prescriptions at the Department of Veterans Affairs.

Kennedy is confident that the bill has a good chance of getting through Congress.

Ethan Nadelmann, executive director at the drug law reform advocacy group Drug Policy Alliance, echoes this optimism. He pointed out that there has been a significant change in the landscape: three years ago, this proposal from three prominent senators “would have been unthinkable”.

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