Will Recreational Cannabis Legalization in Canada Affect the U.S.?

Last Updated on Jan 3, 2018

Canada began their cannabis legalization journey over 16 years ago when the first medical marijuana laws were passed. Recreational cannabis legalization has been a priority since Prime Minister Justin Trudeau took office in 2015. Canadian lawmakers are optimistic that 2018 will mark the beginning of legal recreational cannabis sales in their country. Observing our neighbor to the north as they take this step may influence U.S. lawmakers and citizens to change their perspective on cannabis as well. Recently, a Gallup poll found 64 percent of Americans support legalizing cannabis  for medical and recreational use, an increase over just one year ago, when Pew Research found 57 percent of Americans support marijuana legalization. U.S. support of nationwide legalization will continue to grow as it has ever since Colorado became the first state to legalize recreational cannabis. As Canada takes the lead in national legalization U.S. lawmakers, business owners, investors and medical doctors have much to learn from their successes and failures in the years to come.

US. lawmakers will certainly be observing Canada for insights into how we might be able to follow suit with recreational cannabis legalization. How will Canada’s federal regulations perform? How will each province navigate their regulations? What will work and what will fail? What will be the effect on public safety and crime? Will Canada face challenges with international regulations as their cannabis businesses begin exporting into global markets? These questions are among many that lawmakers in the USA will be looking for answers to over the next few years.

Canada has already started to export medical cannabis globally. Although U.S. federal laws currently prohibit cannabis businesses from exporting marijuana to other countries, it is highly likely that these laws will change in time and U.S. cannabis businesses will be able to compete with Canadian companies in the global marketplace. In the meantime, marijuana companies based in the USA will benefit from observing Canadian companies as they navigate the challenges of international expansion and regulatory compliance. Then, when the time comes for recreational cannabis legalization in the U.S., business owners will be prepared and hopefully avoid the mistakes of their colleagues to the north.

As you may know, a number of Canadian cannabis companies are publicly traded. The availability of cannabis stocks and the pending adult-use legalization has evoked an investment frenzy on the Canadian Securities Exchange. What kind of trade volume are we talking about here? According a Wall Street Journal article in September, 2017, about half of all trades on the Canadian Securities Exchange were related to cannabis businesses. Without final regulations in place it’s hard to say if these companies will truly live up to their current valuations. Also, as regulations are clarified and legalization goes into effect, outside industries will seek to acquire businesses in the cannabis sector and those unable to keep up with these economies of scale will not be able to compete. There is no question that Canada’s cannabis industry will experience strong growth in the coming years but there are many factors that will influence which companies will grow and by how much.

The Canadian Licensed Producers have already started to invest in foreign cannabis businesses. As regulations allow Canadian producers will likely seek to acquire stake in U.S. cannabis companies as well. U.S. investors and businesses will learn a lot from these initial investments in the international cannabis marketplace.

The impact of cannabis medically across the U.S. has already been noted, but many in the medical community want more proof via clinical studies. Although Canada has been researching medical cannabis for over a decade, the advent of recreational cannabis legalization will only increase the availability of the plant for clinical and medical studies across the nation. This may lead to medical breakthroughs that U.S. doctors can implement here in the states, or inspire similar studies approved by the U.S. federal government in the future.