The TMX Group, the company that operates the Toronto Stock Exchange and the TSX Venture Exchange, says companies with business activities that violate U.S. federal law regarding marijuana could undergo a delisting review at the discretion of the TSX.
The group said in a statement that while some states have legalized marijuana to varying degrees and conditions, under federal law it is illegal to cultivate, distribute or possess the drug in the United States.
It said that financial transactions involving proceeds generated by or intended to promote marijuana-related business activities in the U.S. could result in prosecution in the States.
The group said listed companies “with ongoing business activities that violate U.S. federal law regarding marijuana are not complying with” its requirements.
The TMX Group said listed issuers should work to address any gaps in their compliance and if it notes any are engaged in any non-compliant activities it has the discretion to initiate a delisting review.
Marijuana producer Aphria Inc. said the notice is “extremely broad” and it’s difficult to determine what, if any, impact it could have on its business.
Aphria noted that marijuana is medically legal in 31 states and territories and that the U.S. Congress has prohibited the U.S. Department of Justice from using federal funds to carry out criminal or civil actions against state-licensed medical cannabis operators.
However, there have been hints that the current U.S. administration may be less tolerant of cannabis than that of former president Barack Obama’s.
Jeff Sessions, U.S. President Donald Trump’s attorney-general, told Congress last year that “we need grown-ups in charge in Washington to say marijuana is not the kind of thing that ought to be legalized.”
In late July, he wrote to governors of at least three states where recreational marijuana is legal, hinting strongly at a federal crackdown. (The letter amounted to a rejection of advice to Sessions to keep things more or less as they are.)
The version sent to Washington’s governor cited a 2016 report which he said “raises serious questions about the efficacy of marijuana ‘regulatory structures’ in your state.”
The letters are “making everyone nervous,” said Oregon Gov. Kate Brown.
The TSX clarification had been anticipated by marijuana companies looking to get a foothold in the U.S. market as well as U.S. companies that want to access capital on Canadian markets.
Aphria, which is listed on the TSX, announced an investment in Florida in April of this year.
The company (TSX:APH) says its common shares have traded on the TSX and previously the TSX Venture Exchange for almost three years during which time it has raised over $216 million. The company adds that it has had marijuana-related activities in the U.S. since 2015.
On Tuesday, Smiths Falls-based marijuana producer Canopy Growth (TSX:WEED) issued a statement supporting the exchange’s announcement.
“Canopy Growth believes that operating and investing in markets where such activity is federally illegal puts the company at risk of prosecution, puts at risk its ability to operate freely, and potentially could jeopardize its listing on major exchanges now and in the future, limiting access to capital from reputable U.S.-based funds,” it said.