This has been a monumental year for the cannabis industry, with more "marijuana firsts" than I'd dare count. Arguably some of the most impressive advancements include:

  • Vermont becoming the first state to legalize recreational weed entirely through the legislative process.
  • The first cannabis-derived drug being approved by the U.S. Food and Drug Administration on June 25.
  • Tilray becoming the first-ever Canadian marijuana company to IPO on a reputable U.S. exchange.
  • Having nearly a half-dozen pot stocks uplist, or announce their intent to uplist, to reputable U.S. exchanges.
  • Missouri and Utah becoming the 31st and 32nd states to approve marijuana in some capacity, with Michigan legalizing recreational weed to become the 10th state to do so.
  • Canada becoming the first industrialized country in the world to legalize adult-use pot.

As I noted, this is just a snippet of the big events that have occurred this year in the cannabis industry, of which the latter has taken the greatest precedence. When the Canadian marijuana industry is fully up to speed, it could be generating in excess of $5 billion in sales per year.

Former Attorney General Jeff Sessions speaking to an audience from behind a podium.

Former Attorney General Jeff Sessions speaking to an audience. Image source: U.S. Department of Justice official photo.

America's most ardent marijuana opponent is out

However, last week also had a major event that created buzz within the weed community. On Wednesday, less than 24 hours after midterm elections ended, Attorney General Jeff Sessions resigned, pursuant to a request from President Trump.

Sessions has long been an opponent of the cannabis movement. In 2017, Sessions sent a letter to a handful of his congressional allies in Congress in an attempt to repeal the Rohrabacher-Farr Amendment, which is a rider attached to all federal spending bills since 2014 that protects medical marijuana businesses from federal prosecution. This was a direct attempt by Sessions to stomp on states' rights and prosecute medical cannabis businesses in legalized states. Ergo, his departure is widely viewed as a step in the right direction to the legalization movement in the United States.

Of course, I tend not to agree with the pundits, or even some of my colleagues, that Sessions' departure is that big a deal. Sessions was but one person, and the antimarijuana sentiment of the government extends well beyond just Sessions. Republicans, who have a more negative view on marijuana than Democrats or Independents, still control the Senate and presidency, meaning passing cannabis legislation could prove impossible.

Making matters even more complicated is the fact that legalization would reduce the amount of revenue the federal government collects from the industry. While it is true that marijuana is illegal at the federal level, the IRS has no qualms about taxing corporate income and imposing Section 280E of the U.S. tax code on cannabis businesses. This disallows companies that sell a federally illicit substance from taking normal corporate income tax deductions, thereby exposing them to effective tax rates of as much as 90%! Decriminalizing marijuana would mean allowing for corporate income tax deductions, ultimately reducing federal revenue. I simply don't see how this argument will be overcome anytime soon.

A drug-free-zone street sign in a quiet neighborhood.

Image source: Getty Images.

Shocker du jour: Trump's possible AG replacements dislike cannabis as well

But even if I'm wrong and Sessions' departure is viewed as a positive, President Trump's possible replacement candidates as attorney general aren't necessarily going to inspire confidence in the legalization movement.

One possible replacement offered by the president is former New Jersey governor and previous presidential hopeful Chris Christie. If Jeff Sessions was the nation's most ardent opponent of marijuana, Chris Christie would certainly be its second-biggest opponent. There's absolutely no mincing words that Christie would wage war on cannabis if allowed.

Said Christie in 2016 while speaking on New Jersey's Ask the Governor radio program on WKXW 101.5, courtesy of CannabisBusinessTimes.com:

There is nothing we spend in government that is important enough to allow me to willfully poison our children for that money [recreational marijuana taxes]. That's blood money... I have watched too many kids start their addiction with alcohol and marijuana and then move on to much more serious drugs. Every study shows that marijuana is a gateway drug and every study shows that marijuana causes damage.

Without beating around the bush, Christie would be the worst-possible replacement choice for the legalization movement.

President Trump has also floated the idea of Florida's Attorney General Pam Bondi taking over the U.S. attorney general role. While not nearly as staunch an opponent of marijuana as Christie, Bondi has gone to bat to keep smokable cannabis illegal in the state of Florida. Her argument contends that marijuana's legalization in the state is for medicinal purposes only and that smoking cannabis (or anything for that matter) would bring harm to the patient and should therefore be banned. 

Although finding a replacement for Sessions is still in the early stages, it's not looking good for the U.S. cannabis industry.

A judge's gavel lying next to a book on federal and state marijuana laws.

Image source: Getty Images.

If you must tread, tread lightly

Thus, we have a dilemma. On one hand, the U.S. marijuana industry could easily become the most lucrative in the world -- especially if it were legalized. On the other, the federal government continues to provide little incentive to invest given its unwillingness to budge on pot's Schedule I classification.

So what's an investor to do? For the time being, it might be best to keep your distance from U.S. marijuana stocks until there's clarity about the attorney general position. But if you absolutely must dip your toes in the water, consider pot stocks that have global appeal and aren't simply tied down to the U.S. market.

As a quick example, KushCo Holdings (NASDAQOTH:KSHB) is a stock that could thrive with or without the U.S. federal government changing its tune. KushCo is perhaps best known for providing packaging and branding solutions to more than 5,000 marijuana growers worldwide. Because cannabis laws differ from country to country and even within states or municipalities, KushCo is responsible for working with individual pot growers to ensure that they're compliant with local laws. Their packaging is tamper and child resistant and designed to allow brands to stand out in an otherwise crowded field. If the U.S. federal government took a more favorable stance on marijuana, it would open a huge market for KushCo. But with the company already having a presence around the globe, it's not exactly hurting with the way things are now.

To add, KushCo Holdings also acquired Summit Innovations, a supplier of hydrocarbon gases and solvents. Hydrocarbon gas is used in the production of cannabis oil, with solvents important in the production of cannabis concentrates. These high-margin marijuana-alternative products are growing in popularity, which gives KushCo yet another niche it can slide into.

Long story short, the bumpy ride in the U.S. is far from over; but if you must invest in U.S.-based marijuana stocks, make sure they have appeal outside the U.S. as well.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends KushCo Holdings. The Motley Fool has a disclosure policy.