Marijuana Law, Policy & Reform

Editor: Douglas A. Berman
Moritz College of Law

Monday, July 9, 2018

Comparing financial impact of cannabis boom in Canada to "the dot-com mania of the late 1990s"

I have long thought that the economic development potential of marijuana reform could be one big reason the movement has staying power.  Against that backdrop, this new New York Times article about economic (over?)excitement in Canada really struck me because of the comparison to the dot-com boom. The piece is headlined, "Legal Marijuana Is Coming to Canada. Investors Catch the Buzz."  Here is an excerpt:

A financial boom not seen since the dot-com mania of the late 1990s has overtaken Canada. The legalization of recreational marijuana, scheduled for this autumn, is not only a momentous social change and public health challenge, but also a rare opportunity for entrepreneurs like Mr. Asi to be in on the birth of what they hope will become a multibillion-dollar industry.

Early signs of a boom abound: Marijuana growers have plowed millions into investments that, without having recorded profits yet, have stock-market values measured in billions. Down-on-their-luck towns like Chesterville, Ontario, hope that marijuana will reverse economic decline. Former politicians and law-enforcement officials who once opposed legalizing recreational marijuana have now joined or formed companies to cash in on it.

Some provincial governments forecast that tax revenue from marijuana sales will help balance their budgets. And companies offering every kind of service or product — from real estate to packaging — are all out for a piece of the action....

Mr. Trudeau’s government portrayed the legalization of recreational marijuana — Canada has had a medical marijuana system since 2001 — as a way to wipe out the black market, not as a potential job creator or moneymaker for either the government or investors. In effect, he promised a system in which marijuana would be available, but not promoted.

As a result, the federal government will license growers in Canada, and provinces will decide how it is sold to consumers. In some provinces, notably Alberta, the government went with privately operated shops. Others, like Ontario and Quebec, will essentially adopt a variation of the system of government-owned stores that has been used for alcohol sales since Prohibition ended.

Under regulations recently released, marijuana will generally be treated more like cigarettes than alcohol. Advertising will be severely restricted — as will the ability of Canada’s marijuana makers to turn themselves into household brand names. Packages must be uniform and plain, aside from vivid, yellow health warnings and tiny logos. Even baseball caps, T-shirts and all other logo-laden giveaways promoting marijuana brands will not be permitted....

Cam Battley, who once worked in the pharmaceutical industry and who is now the chief corporate officer of Aurora Cannabis (market value: 5.6 billion Canadian dollars; losses in the first part of this year: 20 million dollars), acknowledged that the soaring values of marijuana companies may not be justified in every case. But he also rejected suggestions that the dreams surrounding the industry may, well, go up in smoke. “People should be cautious and do their homework on the cannabis sector,” Mr. Battley said. “We’ve become a mainstream industry in Canada. On this, we’re not seen as a wild and crazy country. I think the world trusts Canada to get cannabis right.”

http://lawprofessors.typepad.com/marijuana_law/2018/07/comparing-financial-impact-of-cannabis-boom-in-canada-to-the-dot-com-mania-of-the-late-1990s.html

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