Will Team Trump bust the marijuana business?
Supporters of the marijuana industry should be celebrating this week’s passage of eight state ballot measures to permit its use by adults. That promises to triple the industry’s size in coming years.
But harshing their buzz are several key allies of President-elect Donald Trump, such as his running mate Mike Pence, who are skeptical about the benefits of marijuana legalization.
Not surprisingly, many in the cannabis industry had expected Democrat Hillary Clinton to cruise to victory and were stunned when it didn’t happen. Now, they’re awaiting signals of how Trump will approach cannabis, even as the industry is set to expand significantly.
“If Hillary Clinton had won, this would have been the grand slam that everyone in the industry had been hoping and praying for for years,” said Chris Walsh, editorial director of Marijuana Business Daily. “With Trump coming in, no one knows what’s going to happen. There are a lot of fears that he might crack down on the industry.”
During the campaign, Trump argued that marijuana legalization should be decided on a state-by-state basis, without being more specific. But in addition to the vice president-elect, some of Trump’s closest advisers, such as New Jersey Governor Chris Christie and former New York City Mayor Rudolph Giuliani, are no “friends of marijuana reform,” according to the Drug Policy Alliance.
Lawmakers in Indiana failed to reach an agreement on a medical marijuana bill during their 2016 session, and according to the Marijuana Policy Project, the state has among the most draconian cannabis laws in the country.
In New Jersey, Christie signed a law allowing medical use of pot last year, but activists have criticized it for being overly restrictive. The governor is adamantly opposed to allowing recreational pot use. Giuliani reportedly has argued that marijuana is a gateway drug that could lead to abuse of more harmful substances like heroin, a view that many experts dispute.
Hope Hicks, a spokeswoman for the Trump campaign, didn’t respond to a request seeking comment.
Voters in California, Maine, Massachusetts and Nevada agreed to allow recreational use of marijuana, doubling the states where that use is allowed. Arkansas, Florida, Montana and North Dakota joined the more than two dozen that allows medical cannabis use. According to Marijuana Business Daily, sales of legal marijuana in the states that just legalized it may reach as high as $8 billion over the next five years, compared with $4.5 billion for the entire industry in the U.S. currently.
“I don’t think we are going to move federal legalization along at the same speed that a Democratic administration would,” said Nick Kovacevich, the CEO of Kush Bottles (KSHB), which provides child-proof packaging to the cannabis industry. “But that’s OK in my opinion because we got the states on board.”
It would be difficult for the Trump administration to get rid of legal marijuana given the windfall the states have earned in tax revenue, according to Kovacevich.
The industry also faces some unique challenges. Since marijuana is technically illegal under federal law, businesses that produce it can’t take common corporate tax dedications, such as the cost of equipment and advertising. As a result, they have heavy tax burdens that hurt profitability.
Indeed, two of the industry’s biggest operators, Colorado-based LivWell Enlightened Health and California’s Harborside Health Center, are facing tax issues. LivWell is being audited by the IRS, and Harborside is challenging an IRS audit in tax court. Some tax experts think the IRS is targeting the industry. An agency spokesperson declined to comment.
But as the marijuana industry grows, so do questions about its potential harm. A recent report by CBSN, a sister network to CBSNews.com, noted that some supporters of legalization are concerned that the industry may grow too dependent on heavy users and kids. Marijuana advocates argue that it causes far fewer health problems than tobacco and alcohol.
Mark Kleiman, a professor of public policy at New York University who advocates less strict marijuana laws, told CBSN: “We’re lurching from prohibition to the most wide-open kind of legalization. Probably a bad idea.”