The beginning of the new decade hasn't exactly gone according to plan. The past couple of months have been consumed by dealing with the coronavirus disease 2019 (COVID-19) pandemic, which has ravaged the U.S. economy and labor market, as well as cost almost 92,000 Americans their lives, as of early in the morning on May 20, 2020. By some estimates, COVID-19 could push the unemployment rate to 25%, which would rival the all-time high set during the Great Depression.
Just in case you forgot, we're just over five months from Election Day
But seemingly lost among these challenges is the fact that this is an election year. In a little over five months, voters will head to the polls (or perhaps mail in their ballots) to determine who'll lead the country forward for the next four years.
From the Democratic Party ticket, former Vice President Joe Biden has emerged as the presumptive nominee from a field that once consisted of around two dozen candidates. Meanwhile, on the Republican ticket it'll be incumbent Donald Trump seeking a second term.
Although pretty much all events lately have been held virtually, because of safety concerns surrounding COVID-19, one thing that's pretty clear is that these two candidates share little in common. Biden, for example, was vice president when Affordable Care Act, commonly known as Obamacare, became law and expanded healthcare options for many low-income Americans and their families. Biden has pledged to expand the ACA if elected as president. Trump, on the other hand, made a pledge before winning his first term to dismantle or repeal Obamacare. He's been modestly successful in weakening many of its components, albeit some facets of the Affordable Care Act remain in place to this day.
And make no mistake about it: Biden's and Trump's differences don't end at healthcare. They have differing stances on immigration, climate policy, trade, corporate taxation, Social Security, and much more.
The one issue Trump and Biden actually see eye-to-eye on
But amid the partisan divide that Washington, D.C., has become known for in recent years, the former vice president and current president do share one thing in common – and it's something that two-thirds of the American public isn't going to happy about. Namely, neither Biden nor Trump has any intention of legalizing marijuana.
According to an October 2019 survey from national pollster Gallup, 66% of Americans were in favor of legalizing cannabis, which is unchanged from the previous year, and up substantially from the 44% who supported legalization 10 years ago. Based on party identification, Democrats (76%) and Independents (68%) strongly favor legalization, with Republicans (51%) relatively neutral. But, to be clear, favorability toward marijuana has improved significantly for self-identified Republicans over the past decade.
Furthermore, 33 states have legalized medical marijuana since 1996, with 11 of those states also allowing for the consumption and/or retail sale of recreational cannabis products. In other words, the cannabis industry has existed in the U.S. in opposition to federal law, which lists it as a Schedule I (i.e., illicit) substance, for the past 24 years.
Yet, even with an overwhelming percentage of the public in favor of legalization, neither candidate is likely to support legalization. However, there could be some nuanced differences for the industry depending on who wins the November election.
Two big changes we could see if Biden wins in November
If the contender, Joe Biden, were to take the Oval Office comes January 2021, there would likely be two key differences to how the U.S. cannabis industry looks today.
First of all, Biden has championed the idea of decriminalizing cannabis at the federal level. Obviously, this wouldn't mean that anyone could have pounds of weed in their possession at any given time. However, small possession offenses may result in a fine, rather than jail time. This could certainly open the door to more consumers considering marijuana products for personal use.
The second change is that Biden's presence makes it a bit likelier that some sort of cannabis banking reform measures will be signed into law during his first term. As a refresher, since most banks and credit unions report to the Federal Deposit Insurance Corporation (a federally created agency), they fear the financial or criminal repercussions of assisting cannabis-based businesses. This means most pot companies can't access traditional forms of financing. Under a Biden presidency, that has a greater likelihood of changing.
This is noteworthy given that real estate investment trust Innovative Industrial Properties (IIPR -0.70%) has made a financial killing by offering sale-leaseback agreements to U.S. multistate operators (MSO). Since MSO's are struggling to access traditional forms of financing, Innovative Industrial is stepping in and purchasing cultivation and processing sites in exchange for cash. In return, it rents these assets back to their previous owners for an extended period of time (10 to 20 years), reaping the rewards of rental income. If cannabis banking reform comes to fruition, Innovative Industrial Properties would lose the advantage of being a funding source for U.S. pot stocks.
Expect the status quo from Trump presidency 2.0
Comparatively, if Donald Trump were to be reelected to a second term, there would be little chance of change at the federal level.
For instance, Trump has indirectly made his stance on marijuana crystal clear through the selection of his two attorneys general. Both former AG Jeff Sessions and current AG William Barr publicly oppose the expansion of the legal cannabis movement. In fact, Sessions tried to repeal certain cannabis protections that would have allowed him to use federal dollars to prosecute medical marijuana businesses in legalized states.
This past December, Trump also attached a signing statement to a federal funding bill that he signed into law. Presidents usually attach signing statements to legislation that they believe could limit their authority to uphold federal law in accordance with their constitutional responsibilities. In sum, Trump's signing statement could, in theory, allow him to completely ignore the protections put in place for medical pot businesses in legalized states.
If Trump wins a second term, large-scale MSOs with sufficient funding should shine. As an example, Green Thumb Industries (GTBIF -0.30%) has opened 44 dispensaries in legalized states and has licenses to open as many as 96 retail locations in a dozen states. Green Thumb has been actively selling properties to Innovative Industrial Properties via sale-leaseback agreements to bolster its balance sheet, and it's getting ever so close to operating profitability. With no immediate funding concerns, a second term for Trump would likely help it continue to corner market share in key states.