Sometime quite soon, adults in Detroit will be able to legally smoke recreational marijuana, much like their neighbours in Windsor, just across the Detroit River, can.
On Tuesday, Michigan voters approved a measure that would legalize consumption 10 days after the vote is certified, which works out to early December. Michigan will be the first Midwestern state with legal pot.
But the state won’t have legal retail until 2020. Can Detroiters pop over into Ontario, legally buy cannabis and take it home to legally enjoy?
No, that would be a terrible idea — at the border itself, where U.S. federal prohibition still prevails, people risk years in federal prison for trying to cross with marijuana.
But some observers expect the U.S. federal ban on marijuana to be repealed in the next few years.
“At some point, there are going to be easy political points to be scored by owning this issue,” says Paul Rosen, CEO of Tidal Royalty, a company that invests in U.S.-based cannabis companies.
“Trump will likely figure out that this is an easy issue in which you can cross the aisle without upsetting his base because it’s popular for both parties, and likely score some relatively easy retail political points without doing anything that would be inconsistent with either a conservative or libertarian agenda.”
Polls show two-thirds of Americans supporting legalization, a number that has risen steadily for four decades. For the first time this year, a majority of Republicans polled were in favour.
And powerful Republican John Boehner, once speaker of the House, sits on the board of cannabis operator Acreage Holdings (along with Brian Mulroney), and recently argued in favour of legalization on the Wall Street Journal’s famously conservative op-ed page.
What would U.S. legalization mean for Canada?
Opportunity for Canadian cannabis companies
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At the moment, Canada is the only industrialized country where cannabis is fully legal. Among other things, that means that access to capital is far easier for producers in Canada than in the United States. The longer that goes on, the bigger the structural advantages the Canadian cannabis industry will enjoy globally – once other countries legalize.
“It creates a whole series of advantages, especially on the international scale,” Deepak Anand, an executive at Cannabis Compliance Inc., a consulting company. argues. “We are far more advanced than other markets are,”
If U.S. federal legalization took a tightly regulated form, Canadian companies would be better positioned to deal with that than the existing U.S. cannabis industry, Anand argues.
“Whatever framework was put in place would most likely mirror Canadian regulations. From a quality assurance and product testing perspective, Canadian companies are very well-positioned in that regard.”
“It’s going to be very challenging for U.S. operators now that are working under state regulations. For them to raise the bar and get up to federal FDA levels (if they were set under legalization) is going to be very challenging, and that’s going to be an opportunity for Canadian companies.”
“I don’t view it as a threat,” Rosen says.
“Were the U.S. to reform in the next couple of years, I see that as a great opportunity for Canadian cannabis companies that are well-capitalized and have years of operational experience, that have really mastered the tech around cannabis, I see it as an opportunity for them to extend their global reach to the last great market on earth, which is the U.S.”
Much simpler border crossings
Canadians with a record for possession, or unwisely admit to a U.S. border guard that they’ve ever smoked marijuana, face lifetime bans from the United States.
Legalization in Canada changed this less than one might have thought: in October, U.S. border officials said they might ban Canadians for legally smoking pot in Canada, if the officer decided that they might also smoke it in the United States.
“It would help Canadians know that they can come to this country without worrying about being barred for life,” Blaine, Wash. immigration lawyer Len Saunders says.
With legalization — and increasing acceptance of cannabis — on both sides of the border, it’s easy to slip into a damaging admission at the border itself, he says.
“Many Canadians now are in the business, or are purchasing marijuana legally, and it’s awkward for them to know what to say. I get these calls daily, from people saying ‘What do I say?’”
“It would be dangerous for a Canadian to say they’re going to Michigan to use marijuana because you’ll be barred, period. It’s exactly what’s been going on in northern Washington State for the last five or six years. That will happen in southern Ontario for individuals going into Michigan.”
Legalization would give U.S. cannabis industry security, access to capital
It’s long been a problem for the U.S. cannabis industry that its activities are all federally illegal — as recently as 2016, a processing plant in Santa Rosa, Calif., was raided by police, including federal agents, who removed US$2 million worth of equipment, seized about US$500,000 in cash intended for payroll, and briefly jailed the owner.
But Rosen argues that at this stage, it’s too big to shut down.
“It’s just a question of when, not if, the full wholesale reform will happen at a federal level, and until then I don’t think anyone really believes that they’re going to have their doors broken down or their windows broken by the (Department of Justice) any time soon, or ever.”
That being said, U.S. cannabis businesses often are forced to deal in cash because banks are edgy about dealing with them.
“You go into our local cannabis stores in Washington State, and it’s a cash-only business,” Saunders says. “Some banks will deal with cannabis, some won’t. It’s a real mismatch of confusion.”
(“There is still some risk, which is creating a chill in capital,” Rosen concedes.)
However, repression is only one policy decision away, and it “continues to remain a risk in the U.S.,” Anand argues.
“It’s very much a live concern, and that concern will remain until you’ve got some sort of U.S. legalization.”
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