Does U.S. Attorney General Jeff Sessions dream about siccing Department of Justice (DOJ) staff on marijuana businesses in states that have allowed legal use of the drug? You might think so based on some of the comments he's made in the past about marijuana and his decision to rescind policies that protected those businesses earlier this year.
Even if Sessions does indeed have such dreams, though, they will remain unfulfilled for now -- at least in part. Congress took action last week that thwarts the DOJ from intervening in states that allow medical marijuana. But does this move help U.S. marijuana stocks?
Thwarting two different Sessions in D.C.
What happened to thwart Jeff Sessions? On May 17, the U.S. House of Representatives Committee on Appropriations for Commerce, Justice, Science, and Related Agencies (CJS) voted to renew protections for state medical marijuana programs when the current spending bill expires in September.
Since 2014, language has been included in the federal budget that prevents the DOJ from using any funds to target patients or providers who are in compliance with state laws regarding medical marijuana. This language was most recently approved in March, with the $1.3 trillion spending bill. However, that legislation only funded the government through September.
The difference this time around is that the protection against interference by the DOJ came from the House of Representatives rather than the Senate. In the past, Rep. Pete Sessions (R-Tex.) -- who isn't related to Jeff Sessions, by the way -- blocked any attempts to vote on marijuana amendments using his position as chairman of the Rules Committee.
This time, though, Rep. David Joyce (R-Ohio) used a tactic that Rep. Sessions could do nothing about. Rep. Joyce slipped language into an amendment to the funding bill approved by the Appropriations committee. The Republican congressman tweeted that the amendment was "great news for states' rights and those suffering severe pain."
Impact on marijuana stocks
What does the move mean for marijuana stocks? Not much.
The maneuver by Rep. Joyce ensures that legislation from the U.S. House of Representatives to fund the federal government beyond September will continue to keep the DOJ from going after state medical marijuana programs. But that merely ensures the status quo will continue. And it was highly likely that the Senate would have kept the protection in place even if the House didn't.
Scotts Miracle-Gro (NYSE:SMG) is something of a bellwether stock for the U.S. marijuana industry. The company's Hawthorne Gardening subsidiary is a key supplier of hydroponics, fertilizers, and lighting systems used in growing marijuana. But Scotts Miracle-Gro stock barely budged following the announcement about the House amendment.
Of course, Scotts Miracle-Gro does much more than just sell products to marijuana growers. Around 90% of the company's total revenue stems from its other consumer lawn and garden products. However, Scotts has definitely focused heavily on the marijuana industry. Just last month, the company acquired Sunlight Supply for $450 million, a deal that should double its sales to marijuana growers.
But it's not surprising that investors in marijuana stocks, including Scotts Miracle-Gro, collectively yawned at the latest news from Congress. Expectations of a continuation of the measure to keep the DOJ from interfering in state medical marijuana programs were baked into the stocks' prices.
What could make a difference
There is something that really could make a difference for U.S. marijuana stocks, though. And if it happens, it will become reality in large part thanks to none other than Jeff Sessions.
Sessions' decision to rescind the Cole memo and other Obama-era policies that protected states with legalized marijuana had consequences. U.S. Sen. Cory Gardner (R-Colo.) became so fed up with Sessions' move that he pledged to block every major DOJ nominee until something changed. Gardner delivered on his threat.
Eventually, though, President Trump realized that a change was indeed needed. In April, the president and Sen. Gardner struck a deal. In return for Sen. Gardner removing his holds on Senate votes for DOJ nominees, President Trump promised that the federal government wouldn't interfere with states like Colorado that have legalized marijuana. The bigger part of the deal was that President Trump agreed to support legislation that would permanently allow states to make their own decisions with respect to marijuana legalization.
Assuming that such legislation does pass Congress and is signed by the president, it would have enormous implications for the U.S. marijuana industry. You can bet that Scotts Miracle-Gro and other U.S.-based stocks would soar. It would also likely open the floodgates for a Canadian invasion of sorts.
Right now, the biggest marijuana players are in Canada. The world's two biggest marijuana stocks by market cap are Canopy Growth (NYSE:CGC) and Aurora Cannabis (NYSE:ACB), both of which are headquartered in Canada. These companies have been wary of building significant operations in the U.S. because of the threat of having their stocks delisted from the Toronto Stock Exchange. A change in U.S. federal law regarding marijuana would remove that threat.
Will this kind of legislation actually make its way through Congress anytime soon? There's no guarantee, but don't be surprised if it does. As Rep. Joyce stated before the committee vote that passed his amendment, "I'd be remiss if I did not point out that recent polling from just last month shows 92 percent of the American people support the use of medical marijuana. In fact, even more voters from every political demographic oppose federal interference in state marijuana laws."
Joyce is right. Americans' support for legalized marijuana, especially medical marijuana, is greater than ever. It's quite possible that Jeff Sessions' dream won't become reality -- but his nightmare might.