2th Jul 2021
The prospects for legal cannabis in the United States (US) significantly improved after Supreme Court Justice Clarence Thomas said that federal laws against the industry are inconsistent, making a national prohibition unnecessary.
The statement comes after the court decided not to hear a new case that is related to tax deductions claimed by a Colorado medical cannabis dispensary.
Justice Thomas said, “A prohibition on interstate use or cultivation of marijuana may no longer be necessary or proper to support the federal government’s piecemeal approach. Federal policies of the past 16 years have greatly undermined its reasoning. The federal government’s current approach is a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana.”
Justice Thomas’ five-page statement covered a wide range of topics and we are favorable on how the rhetoric from a conservative member of the Supreme Court has changed. In the statement, he asserted that cannabis businesses do not experience equal treatment under the law.
Currently, 36 states have legalized medical cannabis and 18 have legalized recreational cannabis. During the last few years, the landscape of the US cannabis industry has changed and there are several operators that are valued at more than $1 billion.
One of the most significant changes is trend is related the number of multi-national conglomerates that are investing in the legal cannabis via a subsidiary and we expect this trend to become more much substantial in the near future.
Earlier this week, HEXO Corp (TSX: HEXO) (NYSE: HEXO) announced an important development and reported to have completed the previously announced acquisition of its first US production facility through a wholly owned US subsidiary. The ~50,000 sq. ft. facility will provide US consumer packaged goods (CPG) companies and consumers with access to the Powered by HEXO® technology and products.
The Colorado production facility is zoned for production of a full range of cannabis products and offers a variety of operational capabilities. The site is located along primary shipping routes and will be retrofitted to support Powered by HEXO® initiatives across the country. The brand is expected to be a trusted solution for leading CPG companies to safely enter the cannabinoid market. By combining HEXO’s expertise in cannabis with CPG partners’ expertise in their industries, the company expects to co-develop premium cannabinoid-infused products.
Two other large cannabis operators that we are focused on are Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC) and Cronos Group Inc. (TSX: CRON) (Nasdaq: CRON). The companies have received more than $1 billion of investments from Constellation Brands (NYSE: STZ) and Altria, Inc. (NYSE: MO), respectively, and we consider this to be a testament the changing landscape of the legal cannabis industry.
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