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Clearing Out the Haze: Five Things to Know about the Legalization of Cannabis

Clearing Out the Haze: Five Things to Know about the Legalization of Cannabis

Canada is on the cusp of an exciting new industry, with a unique opportunity to lead in innovation, development, health and safety, and more. On October 17, 2018, Canada will become the first G7 country to fully legalize adult-use recreational cannabis across the nation.

To understand the disruption ahead, we asked Jay Rosenthal, co-founder and president of Business of Cannabis — Canada’s authoritative source for news and analysis of the cannabis industry — to share five key insights into this burgeoning worldwide industry and Canada’s role within it.

1. What’s Available and What’s Not
When cannabis is legalized on October 17, 2018, Canadians will only legally be able to buy dried flowers, or the “buds”, of the plant through retail stores. This means consumers will need to smoke the dried flower in order to ingest it.

In more mature recreational markets though, such as California or Colorado, retailers are finding that consumers are smoking a lot less. In fact, more than 50 per cent of cannabis sales are for non-smokable forms such as vape pens, edibles, beverages, patches, and sprays.

Health Canada has one year to approve the retail sale of other forms of cannabis products in Canada, which will significantly open the market to a wider range of products.

2. Canada is the Centre of Cannabis Finance
The world financial markets for cannabis are centred in downtown Toronto. Both the Toronto Stock Exchange (TSX) and the Canadian Securities Exchange (CSE) already have a healthy listing of cannabis-related companies, many of which are Canadian. However, we are also seeing an increase in American and international companies entering the market as well because of our uniform national approach to legalization.

In contrast, the US has not legalized cannabis across the country. The state by state approach has made investors wary because the states are operating at odds with their own federal government. Therefore, cannabis finance has officially set up shop in Canada because it’s a safer choice.

3. Chaos in the US is Helping Canadian Cannabis
The US approach to cannabis has been erratic. While 30 states have adopted a medical marijuana program, only nine have some form of legal, adult-use recreational cannabis. Since cannabis is still illegal in the US federally, each state basically has to operate as its own little country. That means traditional banking is mostly off-limits as well as capital markets. It also means that it is illegal to move cannabis products across state lines. So as US-based cannabis companies struggle to move forward, Canada’s national approach is helping to develop some of the most sophisticated, well-capitalized cannabis companies in the world.

4. But Chaos in the US is Also Hurting Canadian Cannabis
The chaotic state by state approach in the US simultaneously hurts Canadian cannabis companies as it means the US consumer markets are largely closed off. Canada’s largest stock market, the TSX, has ruled that if you are listed on the TSX then you cannot have operations in the US. This means that companies listed on the TSX are unable to access the US market. If the US market was fully open to Canadian cannabis companies, they would be allowed to build cross-border brands and integrated operations, but this opportunity is not on the horizon as of yet.

5. Social Implications are Various, but so are the Benefits
Much has been said about the impact of recreational cannabis on workplaces, driving, teenagers, etc. Certainly, there will be an adjustment period as HR departments, law enforcement, and parents decide how to best handle the changing landscape. However, the benefits of legal cannabis must also be part of the conversation. We are only at the start of discovery and research that will bring new, safer, and less addictive health and wellness products and therapies to market in the age of cannabis.

Jay Rosenthal has a 20-year career at the intersection of media, business, politics, and policy. As the co-founder and president of Business of Cannabis, he provides context and insight into this dynamic and ever-changing Canadian sector.

Interested in learning more about Jay and what he can bring to your next event? Email us at [email protected].