2021 could not have ended any worse for the marijuana industry, is there hope in 2022?
They say there are silver linings in all bad situations, or that it is always darkest before the light. For the marijuana industry in America, the end of 2021 was just one gut punch after another, dashing the dreams of Federal legalization for millions of people across the country. How bad did the end of 2021 go for the cannabis industry, let us count the ways:
No Safe Banking Act – In a shock to even those that oppose full legalization the Safe Banking Act was removed from the Defense Spending Bill. With no clear passageway in site for marijuana businesses to get bank accounts and to be able to pay taxes with checks, the glimmer of hope for incremental Federal changes fell by the waist side for 2021 and possibly 2022. This was a gut punch to the cannabis industry because it was a bill that did not require someone to approve of medical or recreational cannabis legalization in general, just that those state-legal businesses already in operation could use banks, deposit money, get merchant accounts, and protect their employees from possible crimes such as burglary and assault. This was not a fundamental approval of the legalization of marijuana, but just the fact you want to keep fellow Americans that are working in the cannabis space safe from crime, allow business to pay taxes and bills correctly, and to create a paper trail for millions of dollars in cash revenue. You did not have to be a weed proponent to want to see Safe Banking approved, just that you believed that the dispensaries with millions in cash bills created a high-risk environment for neighborhoods and employees of the business. This was more of a public safety act than a pro-cannabis act, and it failed to even get enough support to be included in the Defense Spending Bill.
Visa Warns on Cashless ATMs – Since marijuana companies cannot have bank accounts and credit card processing, many stores and MSOs rely on “cashless ATMs,” a workaround created to help facilitate point-of-sale transactions for dispensaries. Studies show that when payment workaround like this are introduced that average order size goes up 30%. Many businesses rely on this workaround in order to process a transaction and stay in businesses. Visa is well aware of how cannabis companies are getting around the “no credit card machines for marijuana companies” and issued a stern warning letter saying there are aware of the situation, they know it is wrong, and they are going forward with penalties and fines for merchants using such tactics. Fines can be retroactive and enormous, and our prediction is that Visa will want to make an example out of a few members of the marijuana industry and push for jail time, money laundering charges, wire fraud, RICO Act violations, etc. etc. Remember the intermediaries that set up all those fake corporations and fake credit cards accounts for EAZE delivery are in jail and doing Federal jail time right now for similar workaround ideas to Visa and Mastercard rules.
To summarize the first two items, no bank accounts, no processing credit cards, and oh, by the way, your workaround system is done, and we are coming after those people that cheated the rules by using a cashless ATM system. Not good.
Midterm Elections – If you thought it was tough to get a majority of sixty votes in the Senate to legalize cannabis now, wait until the Democrats lose a few seats in the upcoming mid-term elections. To quote a famous phrase, “This was supposed to be the best of times?” Remember when Georgia went Democratic and we “won the Senate” since the Senate was split but VP Kamala Harris was a tie-breaking vote in case of a split even vote? The Democrats have the presidency, the House, and the Senate in a way, and they are still well short of the votes needed to pass Federal legalization. The moral of the story, it is not going to get any better politically going forward, only downhill from here as the Republicans win some seats back with voter unrest over COVID, vaccines, Biden, gas prices, etc.
Mitch McConnell Still Hates Weed – The Evil Emperor himself still hates marijuana legalization and will block it until he is no longer in the Senate or Citizens United tells him it is now okay to legalize it. Big Pharma, tobacco, and alcohol have so much power and influence over elected officials through PACS like Citizen’s United, it is clear that marijuana legalization is not going to happen until those special interest groups say it will happen. Until Mitch and his band of eight power-broker Republicans decide to legalize weed, the Senate may never be able to pass legalization. Mitch even made fun of Democrats, again, for trying to put the Safe Banking Act in the Defense Spending bill. Why a Senator from Kentucky is so against marijuana is beyond me, but he is, and we will not see weed legalized until Uncle Mitch says it is time. Sorry, cannabis world.
Cannabis Stock Prices Reflected the Pain – The green rush, or so it was called, into cannabis stocks, where generation wealth was going to be created, felt the pain of the dire year-ending events. Even major MSOs stock like Curaleaf and Green Thumb industries tanked and continue to drop. As Wall Street says, “never try to catch a falling knife,” with no hopes of even incremental legalization steps, we could see even lower bottoms on cannabis stocks. Curaleaf, once a sure thing safe bet, hit highs at $18 a share, now trades at $8.60. Green Thumb once at $38 a share, not trades at $19 a share, and those are the safe-bet cannabis stocks. SPACS, or public “black check” shell companies used by some in the cannabis industry to go public, fell from Wall Street favor just as cannabis companies were using them to get listed. Weedmaps, or MAPS, the darling of the cannabis software industry, put out stellar numbers, but saw their SPAC listed stock price go from a high of around $28 a share, to $6.23 a share at the time of writing this article. The scary part is that without a catalyst like Federal legalization to move stocks higher, there is not much reason to hold out hope for massive stock pushes higher, the numbers for the MSOs are already baked into future earnings.
Are There Any Silver Linings?
At the Federal level, no. As Morgan Fox pointed out recently on the Green Rush LIVE show, there were massive gains at the state level, and continued momentum as more and more states at least start a medical program, and those with medical programs begin recreational legalization. If you are grasping at straws and are the eternal optimist, I guess you can sleep better at night holding out knowledge that a few more states will legalize medical or recreational in 2022. Less and less people are getting arrest for marijuana possession in the US today as compared to even 5 years ago, so that is also a good trend, but nothing close to the goals the marijuana industry had for 2021.
Europe is by far a highlight worldwide for the cannabis industry. While many, including this site, said do not expect worldwide legalization until the US legalized first due to the UN Drug Treaties, the rest of the world treated the UN just as they always do and ignored them and legalized. More and more countries are legalizing cannabis without US approval or waiting for the US to legalized it for access to the US financial systems. Germany by far was the biggest win for the marijuana industry, as they approved recreational marijuana for 2022 much like Canada did as a country in 2018. Mexico, Malta, Guernsey, Costa Rica, Belize, Jamaica, and a host of other countries are in the process of legalizing cannabis in 2022 in some form or another, even if they all start with national medical marijuana programs. So much for UN drug treaties, too much money and opportunity on the line to worry about getting scolded at the next UN meeting. Oh, COVID cancelled the next in-person meeting of the UN, too bad.
The good news is that it cannot get much worse for US legalization. At some point by the end of 2022 there may be close to forty states with at least medical marijuana programs approved. Since there are only fifty states, some are assuming Federal law will have to change once 40 to 45 states have at least medical cannabis, right? I do not know if I would buy into that train of though as long as Mitch McConnell is the Senator from Kentucky. We could have forty-eight out of fifty states with medical marijuana and Mitch may not acquiesce to legalization at the Federal level.
It is dark out there right now, but doesn’t that mean the light is about to breakthrough?
WHAT CAN WE SEE IN 2022? READ MORE...
WHAT STATES WILL LEGALIZE CANNABIS IN 2022? READ OUR LIST..
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