Cannabis Industry Sits on Precipice of Major Expansion

(TheStreet) A string of good news for the cannabis sector may prompt institutional investors to get into the game, but watch valuations increase.

The cannabis industry could be on the precipice of real boom. Not the slow trickle of PIPEs and venture funding rounds investors have seen since 2014 but a full-fledge boom.

Over the last two weeks, the cannabis industry has seen events which could bring a wave of institutional investment into the sector, as well as other changes.

President Trump cut a deal with Colorado Senator Corey Gardner, R-Colo. to allow states to decide what to do about cannabis. Senator Mitch McConnell’s R-KY introduced his own legislation to make hemp farming legal in the U.S. And former Speaker of the House John Boehner became a director with cannabis company Acreage Holdings.

Want more? How about the Food and Drug Administration setting up for an approval of the first cannabis-based drug from GW Pharmaceuticals Plc (GWPH – Get Report) ? And the Veteran’s Administration now wants to study the effectiveness of cannabis for chronic pain and PTSD.

Then there is the highest profile development, New York Democratic Senator Chuck Schumer introducing legislation to remove cannabis from the DEA’s list of controlled substances, to decriminalize pot at a federal level and effectively allow states to decide how to regulate the use of medical or recreational marijuana without concern for federal law.

John Downs, director of business development for Arcview Group thinks the recent events are enough to move some risk adverse investors into the sector. “Investors will see this as a sign. This is extremely positive news for the industry.”

Arcview sponsors an investor network that sponsors events putting cannabis companies in front of investors, it also crunches data on the sector and sponsors a marijuana business incubator among a variety of services and businesses.

“Introducing a bill and passing a bill are two very different things. That said the toothpaste is out of the tube. Regardless of the politics, the left sees cannabis as a social justice issue, the right is about state’s rights. Either way, support for cannabis is growing and the next logical step is the elimination of prohibition.”

Under current federal law, cannabis remains a schedule 1 narcotic as classified by the Drug Enforcement Administration. The status keeps pot on par with heroin and LSD as substances with “no currently accepted medical use and a high potential for abuse,”the DEA schedule reads. Pot’s status on the schedule makes institutional investors very uncomfortable.

Adding to that discomfort is the rescission of the Cole Memo this past January directing the Department of Justice to enforce all federal marijuana laws. Attorney General Jeff Sessions also gave pause to the industry and investors. “I reject the idea that America will be a better place if marijuana is sold in every corner store.”

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