How the Trump administration is affecting the multibillion-dollar marijuana industry
By Kate Rogers
The pot industry is one of the fastest growing in the country — projected sales this year are in the billions. But with a new administration at the helm in Washington, D.C., one that is potentially less friendly to legalization, marijuana entrepreneurs and investors alike are dealing with uncertain times.
Startups, analysts and investors convened this week at Marijuana Business Daily's Conference and Expo right outside the nation's capital in Oxon Hill, Maryland. The topic on everyone's minds: what the marijuana industry looks like under a Trump presidency, as Attorney General Jeff Sessions and Press Secretary Sean Spicer have signaled the potential for stricter enforcement at the federal level, where marijuana is technically illegal. The Department of Justice did not immediately respond to request for comment.
"I am concerned about what I am hearing, but we've been through several administrations at this point, and this is a matter of states' rights," says Christie Lunsford, COO of Pro MAX Grow, which sells LED horticultural lighting for licensed marijuana growers and is based in Tappan, N.Y.
"I think the impact we will see coming out of Washington, D.C., is fewer investors coming into the space ... fewer people launching businesses direct to the plant — cultivation, dispensing and manufacturing. That's where you're going to see people not wanting to enter the cannabis space," she says.
To date, the growth within the industry is undeniable, with marijuana legalized for recreational use in eight states and Washington, D.C., and for medicinal use in 30 states and Washington, D.C., per Marijuana Business Daily.
Projections vary among industry analysts, but the numbers are substantial. Marijuana Business Daily predicts retail sales will hit $6.1 billion for 2017 and the industry could have a maximum economic impact of some $68.4 billion by 2021; GreenWave Advisors predicts $7.7 billion for 2017 and $30 billion by 2021 if recreational and medicinal cannabis is legalized nationwide.
Capital has also flooded into the space — nearly $1 billion from 2012 through 2016, according to GreenWave Advisors, citing data from Pitchbook. What's more, Marijuana Business Daily finds that investors report plans to increase the size of their investments this year. The average investor or firm involved in the industry has put around $450,000 in cannabis companies to date, with each investment coming in around $100,000. But this year, they plan to invest around $500,000 on average in marijuana businesses.
"The Trump Administration has not yet changed our strategy, because there's been a lot of rhetoric but not a lot of action," says Patrick Rea, CEO and co-founder of Boulder, Colorado-based Canopy Accelerator, an investment fund for early stage cannabis companies. It has invested over $6.5 million since early 2015 in more than 64 companies.
"A lot of investors are becoming more aware that they have an impact on what the administration might decide or not decide to do based on how they present themselves as a business-friendly environment, creating jobs and having positive effects on society," Rea says.
Investors such as Emily Paxhia are also closely watching developments out of Washington as they strike new deals. Paxhia is managing director at San Francisco-based Poseidon Asset Management, which has a fund dedicated entirely to investing in the cannabis space. Since January 2014, the fund has invested nearly $20 million into 30 cannabis companies.
"We take everything that is happening from the top down in the regulatory environment very seriously," says Paxhia. "We are not sure what the administration is going to do. ... It makes us really think carefully about the types of investments we are placing and whether or not it stays in the United States or moves abroad."
But for some cannabis entrepreneurs, Washington isn't on the radar as a potential problem. Ryan Wileman, founder of San Diego-based Abscent, which sells odor-absorbing bags marketed toward the cannabis industry, isn't worried.
"Before the new administration I was selling a lot of bags, and now that they're in, I am still selling a lot of bags," Wileman says. "I think that no matter what, people have a need to keep that smell discreet."