Marijuana businesses brace for investment
chill as U.S. changes policy
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[January 05, 2018]
By Salvador Rodriguez and Chris Prentice
SAN FRANCISCO/NEW YORK (Reuters) - Cannabis
businesses across the United States said they are bracing for an
investment slowdown following the U.S. Justice Department’s Thursday
directive that will allow the enforcement of federal marijuana laws in
states that have legalized the drug.
U.S. Attorney General Jeff Sessions announced that the Justice
Department was rescinding an Obama-era policy that eased enforcement of
federal marijuana laws amid a wave of legalization in states from Alaska
to Pennsylvania.
"In the short term, this news will further scare away investors which
will, in turn, slow down cannabis entrepreneurship,” said Nicolas Ruiz,
co-founder of Cloudponics, a San Francisco startup that makes technology
which can be used to grow marijuana.
Marijuana legalization has spurred new businesses from growers to
retailers, delivery services, providers of supplies and technology
startups serving the industry.
Lawmakers from U.S. states that have legalized marijuana, including
California and Colorado, denounced the directive, vowing to enforce
their laws and protect the burgeoning cannabis industry.
"In California, we decided it was best to regulate, not criminalize,
cannabis," said California Attorney General Xavier Becerra. "Unlike
others, we embrace, not fear, change."
The shift in policy comes just three days after California launched the
world's largest regulated commercial market for recreational marijuana.
Funding for cannabis startups has surged since Colorado's legalization
of recreational marijuana use in 2014. Since then, the industry has seen
nearly $1.3 billion in equity funding, with more than $600 million in
2017 alone, according to research firm CB Insights.
"While it's unclear if this directive is going to directly impact
cannabis funding itself, it demonstrates that the space is still very
uncertain from a regulatory standpoint,” said Nikhil Krishnan, senior
intelligence analyst for CB Insights. “That uncertainty alone makes many
investors uncomfortable and can hamper a company operating in the
space."
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A bag of marijuana being prepared for sale sits next to a money jar
at BotanaCare in Northglenn, Colorado, U.S., December 31, 2013.
REUTERS/Rick Wilking/File Photo
Investors and entrepreneurs point to the industry’s momentum as a
reason for remaining bullish on the sector’s prospects.
“The train has already left the station,” said Jonathan Rubin, chief
executive of New Leaf Data Services in Stamford, Connecticut,
forecasting a backlash from voters, patients and politicians. New
Leaf runs a data and pricing service for cannabis clients.
Others say the directive has them concerned.
Still, Mike Kramer, CEO of 420Blockchain, a Boca Raton, Florida,
startup whose technology lets cannabis companies track their supply
chain, said the industry was concerned, if determined. “We’re going
to be resilient,” he said.
Steve DeAngelo, executive director of Oakland, California,
dispensary Harborside, said he has no plans to change his operations
nor does he expect the Justice Department directive to impact his
business, which begin selling recreational marijuana this week.
“Every day, I instruct my employees to scrupulously observe
California’s laws and regulations regarding cannabis,” DeAngelo
said. “We did that yesterday, we are doing that today, and we will
continue to do it tomorrow and well into the future.”
(Reporting by Salvador Rodriguez and Chris Prentice; Editing by
Leslie Adler and Cynthia Osterman)
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