War on marijuana
Despite U.S. government’s reversal on legalized sales, experts see no immediate threat to Texas’ limited medical-marijuana program
Texas cannabis investors and businesses are wary of the Justice Department’s decision to take steps that could threaten the marijuana legalization movement.
BETWEEN 7:51 a.m. and 12:08 p.m. Thursday, as details of the government’s aboutface on legalized marijuana sales filtered out of Washington, Alan Brochstein sent a flurry of messages to the 800plus subscribers to his 420 Investor website.
Brochstein, a Houstonian who founded the site a little more than four years ago to guide investors in the multibillion-dollar U.S. legalcannabis industry, was suddenly urging caution. After a bullish nine-week run in which the marijuana stocks he monitors had tripled in value, prices were quickly falling. The 420 Investor index closed down 13.3 percent on the day (but up still up 174 percent since Oct. 27).
Weighing down the industry was Attorney General Jeff Sessions’ revoking of the Obama-era Justice Department memorandum that discouraged federal prosecutors from pursuing charges against cannabis activity in states that legalized it. The drug remains prohibited despite the growing state-bystate legalization movement, but the previous administration had opted not to spend government funds making a federal case out of it.
Though the reversal had been expected for close to a year, investors didn’t take Sessions’ announcement well.
“He’s very anti-cannabis and lives in an ’80s mindset,” Brochstein said.
The biggest immediate impact in Texas is on those who have invested in or do business with states where the drug is legal for medical or
recreational use. Experts see no immediate threat to Texas’ fledgling, and strictly limited, legal medicalmarijuana program.
The so-called Compassionate Use Program, which was signed into law in 2015 and is overseen by the Department of Public Safety, allows patients with intractable epilepsy to access low-THC cannabis oil medication. Only three dispensaries, two in Austin and one in Schulenberg, have been licensed.
Those involved with the state program are currently protected from prosecution, said Franklin Snyder, a Texas A&M University law professor who studies the legal marijuana industry. He said all medical-marijuana programs in the nation can, for now, count on an amendment included in Congress’ latest budget appropriation that prevents the Justice Department from using its funds to prosecute legal medicalmarijuana dispensaries and their patients.
Additionally, given how limited the Texas program is in its scope — servicing about 150,000 patients in the state — Snyder and others don’t see any attorney general attempting to prosecute families seeking medication to treat epilepsy. Some see the move as political suicide.
The DPS said in a statement Thursday that the department had “not received official communication from our federal partners” regarding the new enforcement guidelines.
“However, as always, we will review any changes in federal policy to determine the impact, if any, on our department’s programs,” the statement said.
The protection granted by the budget amendment is good only until Jan. 19, when the current budget expires. And Brochstein noted that Sessions did not distinguish between medical and recreational cannabis when saying “marijuana is a dangerous drug and that marijuana activity is a serious crime,” in his memo to U.S. attorneys on Thursday.
“What Jeff Sessions is doing is only supported by Jeff Sessions and extreme right-wing individuals in a small minority,” Brochstein said.
Investors are now expressing uncertainty despite the recent stock boom driven by California’s legalization of recreational marijuana effective Jan. 1.
“There is a ton of speculative money that just flooded into the market, and this is going to be a nasty shakeout,” Brochstein wrote to his subscribers Thursday morning.
He charges $600 a year for services that include model portfolios, weekly news summaries and monthly newsletter analyzing industry stock trends. Many of his clients are men in their 60s.
On Thursday, his site updated every few minutes.
Around 9:30 a.m., Chris Bechtel, a resident of The Woodlands, woke up to see industry stocks dropping. He was puzzled as to what had happened overnight.
For 30 years Bechtel worked in oil and gas, first as co-founder of Omni Laboratories and later with Weatherford International after selling Omni to the global company.
In 2014, when researching medical-marijuana treatments for his father’s dementia, Bechtel stumbled across what he sees as a burgeoning entrepreneurial industry.
“I had just grown tired of the oil business,” Bechtel said. “This was a rejuvenation of my career.”
He began investing in cannabis stocks and joining startups in leadership and advisory roles. Now he’s president and CEO of Colorado-based Surna, which sells and maintains climate-control equipment used by marijuana cultivators. The company of 25 to 30 employees reported between $7 million and $8 million in revenue over the last few years, he said.
Surna and companies like Houston-based Indoor Harvest that serve cultivators don’t see as big a legal threat due to Sessions’ decision as those who actually handle the cannabis plants. Yet they, along with cultivators and industry leaders, say it’s hardly the time to remain complacent.
Many now turn to Congress to ensure that stateregulated programs are protected from federal prosecution, with some noting that the budget amendment meant to protect medical-marijuana programs could be expanded to include protection for recreational activity.
Aaron Smith, co-founder and executive director of the National Cannabis Industry Association, said the ultimate goal would be a law taxing and regulating marijuana the same way as alcohol.
The industry, now estimated at up to $10 billion despite the lingering federal prohibition, is used to overcoming legal challenges, Smith said.
He cited a Gallup poll from October showing that 64 percent of Americans support making marijuana legal. A separate Quinnipiac University poll in April found 73 percent of surveyed voters oppose federal intervention in state marijuana laws.
“I would caution against the feeling that the sky is falling,” Smith said.