Jeff Sessions' New Marijuana Policy Is Scaring Investors Away From the Cannabis Industry

We're almost a month away from when Attorney General Jeff Sessions decided to rescind protections for states with legalized marijuana, and it seems not much has changed with how those laws are being enforced. But there's still one way that the industry is being affected by Sessions' decision: investment.

NPR recently ran a story about how Sessions' policy change has scared away investors from the cannabis industry. One Colorado attorney discussed how he was preparing to broker deals with a private equity firm and the industry worth tens of millions that fell apart after Sessions' decision. Other brokers in the industry told the same story about deals falling apart after Sessions' decision.

The reason is risk. With the Cole Memo in place, investor felt that the likelihood of the Department of Justice instituting a crackdown were highly unlikely. But now that the memo is gone, even with assurances from U.S. attorneys that they will not pursue marijuana prosecutions, investors see the risk as too much to put their money into.

Losing private funding in the cannabis industry is a major problem. Most banks do not want to get involved with marijuana businesses, which means cannabis companies cannot take out business loans and rely on private investors for their funding. 

The other issue is that the investors who do stay in the industry want more for the money. They're demanding greater ownership stakes in the companies they invest in, which cannabis companies are often wary of doing because of how high the growth is. Why sell a huge chunk of your ownership away when it's increasing in value so much?

So it appears that Sessions has inadvertently found a way to hurt the marijuana industry. Apparently if you can't convince people that cannabis is dangerous, you can just sabotage the industry and hope it collapses.

(h/t NPR)


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