Canada has ‘a big head start’ but as U.S. legalization nears, that could be ending

Only three U.S. states now completely ban marijuana in any form, and 10 states have fully legalized recreational weed. Over 200,000 Americans work in the legal — or sort of legal — cannabis industry.

But marijuana, medical or recreational, is still completely banned at the federal level.

That doesn’t mean much on a practical level for people who want to toke in peace in states like Colorado. But it means quite a lot to the American cannabis industry — and, indirectly to Canada’s, which enjoys a slanted playing field.

For example, U.S, cannabis businesses flourishing at the state level can’t access normal banking services, which are federally regulated.

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Canopy Growth vice-president Jordan Sinclair expects some form of U.S. legalization — the federal government washing its hands of the issue and leaving it up to the states — sooner rather than later.

“It’s not out of the realm of possibility that it happens during Trump’s presidency,” he said.

The longer Canada’s industry has to establish itself without full U.S. legality, the better the capital-intensive end of it — large producers with big facilities and highly processed products — gets at doing business in its niche.

“We’ve been using that period by getting very good at producing cannabis at scale,” Sinclair said. “We’ve already had a big head start. What we’ve built in Canada up until today is a pretty formidable lead.”

There have been many signs of a shift toward a more tolerant attitude to pot in the United States.

The most recent was a committee vote last week allowing Congress to debate a bill that would give American cannabis companies access to normal banking services.

The Secure and Fair Enforcement Banking Act would let banks, which are federally regulated, provide financial services to cannabis businesses if they’re legal at the state level in the state where they operate.

Federal illegality has left banks largely unwilling to do business with companies that sell marijuana or related enterprises out of concern they could run afoul of federal laws. In practice, some U.S. banks have dealt with cannabis business under cumbersome and expensive rules; the costs are passed on to their clients.

Apart from the inconvenience of not having access to banking services, U.S. cannabis businesses have been forced to deal largely in cash, which has made them a target for robberies.

In 2016, a security guard at a Denver dispensary was shot and killed. An employee at a store near Seattle was shot and wounded during a robbery in 2017. And last year, a courier carrying cash for San Diego cannabis businesses was beaten and robbed.

These are the kinds of obstacles that American cannabis businesses have to deal with, and from which Canadian ones are spared. As unfair as it might seem, Canadian companies might be better prepared to exploit the period after U.S. legalization in the U.S. cannabis market than American ones.

“We’re still in this process of looking down south and wondering when that market is going to open up but we’re in a fantastic position today if it were to happen,” Sinclair said. “We’ve got capital, we’ve got know-how, we’ve got a much bigger team that we could use to approach the market.”

Cannabis science is hobbled in the U.S.

Despite humanity’s long relationship with the plant, decades of illegality has made it hard to study until very recently. Canada has also enjoyed an advantage over the U.S. in cannabis science — so far.

American scientists wanting to study the plant have found it impossible to get federal funding. Canadian universities, on the other hand, have moved aggressively into the space. McMaster University in Hamilton, Ont., for example, has started a centre for medical cannabis research, while the Ontario Agricultural College has started a lab completely devoted to cannabis production.

By contrast, a program at Northern Michigan University designed to train students to work in medical marijuana can’t grow actual marijuana plants for them to study.

“If you polled a hundred people in the industry, you’d get a split reaction between Canada and Israel,” Sinclair says. “Internationally, those are two jurisdictions that are punching well above their weight in terms of the general research atmosphere.”

—With files from Reuters

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