2019 is poised to be a monumental year for the cannabis plant. The recent passage of the Farm Bill as well as sweeping changes across the most populated countries on earth are but two of the many reasons for this optimism. This comes off the heels of big change in 2018, when adult-use was implemented in the largest global consumer market (California) as well as the largest global capital market (Canada). We are well on our way to full federal legalization and continue to expect a nationwide resolution to the state-federal conflict by 2021.
In Cannabis 2018: Five Things To Watch, we anticipated moves towards banking and tax resolution, Canadian investment by big liquor and tobacco, a swing in the Midterm elections and volatility in California cannabis pricing. For 2019, we are pleased to see a legitimate pathway towards banking and tax resolution along with a move towards normalization in Canadian markets. Pricing continues to exhibit wide spreads, a trend we expect to continue and perhaps even intensify. Additionally, our hemp industry will receive a dual octane boost from CBD making its 2019 debut in drug and grocery stores as well as from the December 20th, 2018 passage of the Farm Bill. Lastly, a movement not to be missed includes one that affects nearly three billion humans.
THE GRASS IS ALWAYS GREENER WHEN YOU WATER IT
The government has waged a trillion-dollar war on unarmed plants for eight decades and we are pleased to report an impending plant victory. Five things to watch for in 2019:
Banking and 280(E) resolution
The STATES (Strengthening the Tenth Amendment Through Entrusting States) Act allows each state to set its own cannabis policy while requiring the Federal Government to defer to state legislation on the topic. When enacted, the impact on the cannabis industry will be enormously positive. With the threat of federal action eliminated, increased inflows of investor capital will impact asset values while fueling further growth and innovation. A provision redefining trafficking removes barriers to full banking services, while a provision redefining profit sources as lawful eliminates the application of IRS Code 280(E) (current & severe restriction on standard business deductions for cannabis businesses). Thus, the STATES Act resolves two of the biggest challenges in our industry: banking and taxes – a brilliant piece of legislation that also maintains the status quo for states that are not socially ready to embrace cannabis.