Cannabis reform is all on the Republicans now. What happens next?

TRUMP BUMP?
Cannabis reform is all up to the Republicans now

Driving the news: The election was a bitter pill for the cannabis industry. Four states voted on cannabis legalization initiatives on Tuesday and legalization was soundly defeated in three of them. (Nebraska legalized medical cannabis pending a lawsuit challenging the signatures that put the measure on the ballot). 

Florida was by far the biggest hit to the industry, as many polls, save for one from Victory Insights, predicted the Sunshine State to pass legalization. While a majority of Floridians supported the ballot measure, it failed to clear the 60% threshold needed to pass. 

And if you haven’t been living under a rock, Democrats were routed in the general election. Donald Trump will take office in January, and Republicans will be in control of the Senate — though it remains to be seen if South Dakota Sen. John Thune, or somebody else — ends up being majority leader. The House hasn’t been called as of this writing, but even if Democrats do squeak out a majority, it’ll be a narrow one. 

So here’s what that means: Some cannabis investors and executives, fed up with four years of Democrat-led congressional inaction on cannabis reform, threw their support behind Trump. 

They say the Chuck Schumer-led Senate should have passed the SAFER Banking Act, a banking bill, or other incremental cannabis-related reforms. They argue that tying legalization to a progressive wish-list of social justice initiatives, such as giving preferential access to minorities harmed by the War on Drugs or pushing for things like record expungement ahead of industry-friendly measures, is ultimately what killed reform by making it unpalatable for Republicans. 

Curiously missing from that analysis is that most Red-state voters continue to reject legalization, and that doesn’t bode well for party leadership that wants to be receptive to their base. 

President Joe Biden did undertake the biggest move on federal cannabis reform in fifty years by recommending cannabis be rescheduled to the less restrictive Schedule III, but with recent delays, the change is probably going to to happen under Trump’s second administration. 

Cannabis stocks slammed: Cannabis stocks got the opposite of a Trump Bump yesterday, likely because of Amendment 3’s failure in Florida. 

Trulieve — which spent $140 million on the doomed fight for legalization in Florida — was the hardest hit: Its stock fell nearly 40%. Green Thumb Industries stock fell over 16%. Curaleaf, which reported earnings yesterday, fell 30%. Another US cannabis company, Verano, fell 30%.

MSOS, an exchange-traded fund that tracks a basket of US cannabis firms, fell over 27% and is now down 26% on the year. 

Even the Canadians weren’t immune. Tilray stock fell 13%, while Canopy Growth fell 21%. This is all in a single day. It's an immense value destruction. 

Markets are obviously imperfect and frequently irrational. I’d still have expected to see a bit more of a signal here if Trump was really going to be great for cannabis, despite the loss in Florida. The Dow Jones Industrial Average closed up 3%. 

Our take: Well, Republican supporters certainly got their wish. It’s all on them now to advance cannabis reform. There are no more Democrats to blame after January. 

It remains to be seen who Trump appoints to federal agencies crucial to cannabis reform like the Departments of Justice and Health and Human Services. All policy is personnel, after all, and we’ll see if it’s the prohibitionists, or the reformers, or the people in between who land these appointments.

I also worry that there’s now little incentive for Republicans to advance cannabis reform. They’re not likely looking at the results of Tuesday night, where Republican voters resoundingly defeated legalization, and thinking that cannabis is a winning issue. 

It’s unlikely that with the Republican sweep, we’re going to get a progressive vision of cannabis reform if we get anything at all in the next few years. The industry’s advocacy is going to reflect the new political reality: It’s about jobs, small businesses, and tax revenue. 

Senate Republicans probably aren’t going to be receptive to arguments about racialized policing or the wealth and opportunity gap — but they may see opportunities for job creation and expanded business for banks. 

The industry is sorely hurting for change, and the buck keeps getting passed. In the last year alone, it was SAFER Banking, then rescheduling, and then Florida going legal, and now it’s a Trump victory that many industry investors are hoping will be the next federal catalyst to open up capital markets and let the dollars flow. 

I think we’re going to continue to wait. I hope to be wrong on this, by the way. And it’s also possible that something like the SAFER Banking Act gets attached to a broader package during the upcoming lame-duck session. Hope for the best, but prepare for the worst. 

Last night wasn’t a referendum on legalization: I want to point out that last night was not, by any means, a referendum on legalization despite the very public victory lap anti-cannabis personalities and groups are taking.

Nearly 56% of Floridian voters backed legalization. That amounts to 5.9 million votes — over 1.8 million more votes than the state’s popular governor, Ron DeSantis, got in 2018. (Turnout is always higher in federal election years, but that’s still a signal).

It wasn’t Americans as a whole that defeated legalization. It’s more accurate to say it was specific Americans in deep-Red states like North and South Dakota, which again, in my view, doesn’t bode well for a future Senate Majority Leader from South Dakota moving the needle on cannabis reform. 

It’s also true that voters may have been turned off by the vociferousness of DeSantis’s “think of the children,” attack on legalization, as well as the message — well articulated by his team whether you agree with it or not — that the vision of legalization proposed in Florida was nothing more than a corporate handout rather than about personal freedoms.

And some pro-legalization voters, at least enough to sink Amendment 3 below 60%, may have rejected the version legalization proposed by Trulieve and other cannabis firms in Florida. They may not have rejected a differing vision, as some advocates say, which includes the right to grow and more consumer choice, though it’s too early to diagnose the specific causes. 

Either way, we’ll hold DeSantis and the Florida Republicans to their statements: If Amendment 3 wasn’t the right way to legalize cannabis, then the legislature should do its job and propose something different. Fifty-six percent of voters want it — so get something done. 

What they’re saying: “Amendment 3's near-total funding by Trulieve raised legitimate concerns about market fairness and consumer choice. The measure's failure to include provisions for social equity, home cultivation, or limits on industry consolidation suggests voters are thinking critically about not just whether to legalize, but how to do it in a way that benefits consumers and communities, not just large corporations,” Parabola Center Director Shaleen Title told me. 

And: “It was definitely a setback for the industry, but the momentum of the cannabis movement won’t be derailed,” MariMed CEO Jon Levine said of Florida failing to pass legalization.

-JB

“I’m optimistic about the next couple of years because we did win at the ballot box. Cannabis did win. We didn't win everything that we wanted to, but we have a future President of the United States that has come out in support of cannabis reform in his own way, a very different way from Kamala Harris,” The US Cannabis Council’s David Culver said on yesterday’s Cultivated Live, striking a more optimistic tone. 

“Once that transition office is open in downtown Washington DC, I'm going to be the first in line with my little notepad and my requests of President Trump.” 

David joined Jay and Jeremy to break down what the election results mean for the industry and where we go from here. The Cultivated team also heard from Insa’s Steve Reilly on what Amendment 3’s failure means for Florida’s cannabis industry, as well as Vicente’s Jason Tarasek on what to make of the Midwest. 

Watch it here.

SLANG Worldwide, a cannabis firm operating in Canada and the US, said today it will enter bankruptcy proceedings in Canada and receivership in Colorado and make plans to wind down operations. The company will be unable to pay its debt maturing this month. Read more about the looming debt bomb for cannabis firms.

Cannabis earnings season continues, with Curaleaf and TerrAscend reporting after the market closed yesterday:

• Curaleaf reported a $44 million net loss on $330 million of revenue for the third quarter, down 1% sequentially. That amounts to a 7 cent net loss per share. The company also secured a $40 million credit facility from a regional bank, and touted the fact that its “Donald OG” strain sales correctly predicted the election outcome. 

• TerrAscend reported a $21.4 million net loss on $74.2 million of revenue, coming in below analyst expectations. The losses widened from $8 million the same quarter a year prior. The company also announced it will enter the Ohio market, via an acquisition of a dispensary in Goshen Township. 

• MariMed reported a $1 million net loss on $40.6 million of revenue — the loss shrinking from $4.3 million sequentially. 

Here’s the schedule for the rest of the week: 

November 7

• The Cannabist, 8:00 AM

• MariMed, 8:00 AM

• Verano, 8:30 AM

• Cresco Labs, 8:30 AM

• Jushi Holdings, 4:30 PM

November 8

• Planet 13, 6:00 PM

What the failure of Florida’s Amendment 3 means for cannabis legalization | Forbes

What Donald Trump’s presidential election means for cannabis reform | Marijuana Moment

Legal weed goes up in smoke | City Journal

Amendment 3's rejection raises questions about future of Florida's medical marijuana industry | CBS News