Canadian Manufacturing

Canadian producers hoping U.S. eases cannabis prohibitions nervously eyeing calendar

There is rampant enthusiasm among Canadian players looking for opportunities to expand into the U.S., where the prospect of a legal market that could soon top US$40 billion annually.

June 14, 2021  The Canadian Press

Canada’s cannabis industry, banking on the chance to expand into the United States, is nervously eyeing the American political calendar and the Biden administration’s narrow legislative window to ease federal prohibitions on recreational marijuana.

The White House has said President Joe Biden supports decriminalizing cannabis, legalizing pot for medicinal purposes and changing how marijuana is classified by the Department of Justice to allow for further study of its potential positive and negative effects.

But while Democrats currently hold all the political cards on Capitol Hill, their control of Congress remains precarious, and progressives fear the Republicans are likely to take over the House of Representatives following the 2022 midterms.

That means if change is going to happen in the United States, it needs to happen soon, said David Culver, vice-president of global government relations for Canopy Growth Corp., one of the largest players in Canada’s legal cannabis market.

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“We were literally dealt, in my opinion, the perfect political hand for cannabis reform to occur during this Congress,” Culver said in an interview.

“The White House made it very clear when they took office, at least to our industry, that they needed to get this pandemic under control. We’ve been sitting with this perfect political hand for almost six months now ? and we’re still waiting patiently as it relates to the administration.”

The cannabis landscape in the U.S. is an ever-changing patchwork; the drug is or will be allowed for medical use in 36 states and for recreational use in 13, as well as the District of Columbia. But federal law still considers it a Schedule I controlled substance with high risk of abuse and no accepted medical use, alongside drugs like heroin, LSD and peyote.

As a result, it’s impossible for companies operating in a legal state landscape like California or Colorado to make use of institutional banking or financing services, access capital markets or do business outside their respective state lines. Nor can they take advantage of tax writeoffs for routine business expenses, capital equipment like computers or payroll costs.

Still, there is rampant enthusiasm among Canadian players looking for opportunities to expand into the U.S., where the prospect of a legal market that could soon top US$40 billion annually offers a salve for what have been largely disappointing results at home.

Aphria Inc. CEO Irwin Simon said much the same in April of his Ontario company’s acquisition of SweetWater Brewing Co., an Atlanta craft beer purveyor that aligns its brands with a “cannabis lifestyle.” Aphria merged last month with B.C. giant Tilray, which now controls more than 17 per cent of Canada’s retail cannabis market.