The Marijuana Midterms, Plus Jeff Sessions (!)

Three out of four ballot initiatives to legalize marijuana in some form passed in the US midterms yesterday. Michigan approved recreational marijuana, while Utah and Missouri voted in favor of medical marijuana; each proposal received +53-66% of voter support. Sixty percent of residents in North Dakota voted against legalizing retail cannabis use, however. Here’s where they all stand:

  • Recreational marijuana: Michigan residents voted in favor of legalizing retail cannabis use and sales, making it the first Midwestern state and tenth US state to do so. Now one in five states allow recreational marijuana use, and a quarter of Americans (nearly 80 million people) live in a state where they can smoke or consume the drug if they’re of age.
    How this will work: Recreational marijuana will be legal in Michigan ten days after the election results are certified, which could take a few weeks. That said, adults aged 21 and older living in Michigan will eventually be able buy, possess and use marijuana for recreational purposes. They will also be allowed to grow up to 12 plants in their home for personal use.
    Sales won’t likely happen for a year as the state government needs to establish regulations and issue recreational licenses, although it has a head start since medical cannabis is already legal there. Once all that happens, retail sales of marijuana and edibles will be subject to a 10% excise tax that will go towards implementation costs, clinical trials, roads, schools, and general municipal expenses where marijuana businesses are located.
    Lastly, although North Dakota rejected recreational use of marijuana, it still allows medical cannabis.
  • Medical marijuana: 33 states now allow medical cannabis after Utah and Missouri approved their measures to do so yesterday. Utah will let patients with certain conditions, such as multiple sclerosis, cancer and HIV get medical marijuana cards.
    Out of 3 ballot initiatives that would legalize medical marijuana use in Missouri, voters chose Amendment 2. This measure will impose a 4% tax on sales of medical marijuana, which will pay for the program as well as help fund the state’s veterans commission.
  • Other election progress for marijuana: Chairman of the House Rules Committee Pete Sessions (Republican congressman from Texas) was defeated by Democrat Colin Allred. Sessions has blocked many federal amendments to protect legal marijuana at the state level, even those meant to allow VA doctors to recommend medical marijuana to veterans in states where it is legal. Allred, by contrast, criticized Sessions for this stance over the summer.
    In addition, earlier this year Vermont’s legislature passed recreational use and residents in Oklahoma approved medical use. There are also other states going forward that could pass recreational use through the legislature, such as New Jersey and New York.
    In New Jersey, the State Senate President and State Assembly Speaker said the legislature will vote on legalizing recreational marijuana by the end of this year. In New York, Governor Andrew Cuomo put together a workgroup to draft legislation for a regulated adult-use marijuana program in August. Given that the state legislature would need to pass the proposal, it should help that Democrats just won a majority in the New York State Senate. Especially since Governor Cuomo was re-elected and Democrats also have a majority in the state Assembly.

Arguably the biggest news of all on the marijuana front actually came today with Attorney General Jeff Sessions submitting his resignation. He is a staunch opponent of marijuana and rescinded important memos put in place under the Obama administration to not interfere with legal states so that marijuana businesses could have banking access if they followed certain rules. This move caused a lot of concern and uncertainty for an already cautious industry. While pot stocks gave up their early gains from the election results, they rallied right after this news into the close: Canopy Growth (+8.17%), Tilray (+30.64%), Cronos Group (+8.40%), Aurora Cannabis (+9.19%) and Aphria (+3.93%). Who knows who will permanently replace Jeff Sessions, but few are more against the drug than him.

Bottom line, momentum on marijuana legalization continues to strengthen, especially with support from two-thirds of Americans which is the highest ever recorded according to Gallup. Every state that legalizes adult use of marijuana is one more step towards national legalization, something many investors have been waiting for given their caution as the drug is still illegal federally. Jeff Sessions out is another cherry on top of the sundae.

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