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The U.S & Canadian Cannabis Industries: Same But Different

byAlanaArmstrong4 minutes

Leading cannabis industry analysis firm, ArcView, estimates that legal cannabis sales in North America could grow to $22 billion by 2021—up from $6.9 billion in 2016. Canada's recreational marijuana market is expected to make up a $2.3–4.5 billion slice of that.

The state of legal adult-use cannabis continues to flourish in the U.S. and Canada:

  • Nine U.S. states plus Washington, D.C. have legalized recreational cannabis sales since Colorado and Washington became the first states to do so in 2012.
  • Canada has greenlit every means necessary to legalize recreational cannabis in 2018.

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Canada’s legal marijuana industry is experiencing massive growth, having broken through borders (and UN treaties) to distribute marijuana to the world.

But the U.S.—pioneers of the modern adult-use market—is a force as well. Though the two markets share some similarities, they’re differ in a number of ways.

Canadian Medical Marijuana Feeds Recreational Cannabis

Canada legalized medical marijuana nationwide in 2001. For the U.S., it's been a painstaking state-by-state affair. But Canada's medical cannabis wasn't always the colossus that it is today. It took help and coordination from the government agency, Health Canada, to get it to a state of increasing by 10% a month as was seen in 2017.

Health Canada is responsible for approving producer licences, ensuring that demand and supply are balanced, regulating the use of cannabis pesticides—though this evaded their watch for a while— and helping set prices for the marijuana industry.

The Finance of Legal Recreational Marijuana

The caveat of having such an explosive medical industry before introducing recreational cannabis is that it inflated the worth of a handful of companies that are now swallowing newly licensed producers (LPs) faster than Health Canada can approve them.

Among the top LPs are:

  • MedReleaf (NASDAQOTH:MEDFF)
  • Aphria (NASDAQOTH:APHQF)
  • Canopy Growth Corp (NASDAQOTH:TWMJF)
  • Aurora (NASDAQOTH:ACBFF)

No U.S. marijuana stock is generating the same consistent profits. One reason could be that unlike Canada, in the U.S. marijuana remains illegal at the federal level. This means that some would-be investors are too scared to put their money into an industry that technically could be shut down any day by the federal government.

But the cannabis industry in the states has diversity on its side. Less time appeasing shareholders often leaves more room for entrepreneurship, boldness and innovation. And since legal recreational states allow for all kinds of cannabis products—Canada made only dry flower and oil legal—there's plenty of space for new products.

The Love-Hate Relationship Between Politicians & Cannabis

One of the more glaring differences between two cannabis industries sharing a massive border is politics.

Justin Trudeau's Liberal party maintains a majority of seats in parliament and the majority of lawmakers are either in favour of legalizing marijuana or neutral. However, the problem with legalizing cannabis nationwide is that not all provincial governments want it, or feel ready for it. Yet they’re all caught up in the rush toward the same legalization deadline.

By legalizing state-by-state in the U.S., whether it goes to the polls or, as in Vermont's case, the legislature, it's a definitive agreement, and the state has control over how and when legalization happens, and a lot more autonomy when it comes to doing what's right for its residents.

Yet despite the individual states being able to tailor a marijuana program for residents, there’s still the shadow of the federal government in opposition to legalization looming over everything, spearheaded by Attorney General Jeff Sessions who has rescinded the Cole memo and held closed-door meetings about marijuana and drug policy. No matter how many states legalize cannabis, Sessions still has the power to direct raids of cannabis industry companies and arrests of people working there.

Which Cannabis Industry Composition Will Work Best?

Of course, we’ll have to see which style of marijuana legalization ends up being the more successful of the two. Are the U.S. and Canadian cannabis industries like the tale of the tortoise and the hare, or are they more like conjoined-yet-autonomous twins?

Even the way cannabis is being taxed in either country has a same-but-different aspect to it. Both have instituted cannabis taxes but are using different frameworks. Is it better to tax higher, à la the U.S., and fill budget gaps but risk not competing with the black market? Or go low, like Canada, to undercut illegal cannabis but risk putting a strain on local governments?

Maybe it's more apt to call this one of the world's biggest comparison tests—one that countries can look to in future when they're ready to take the bold step to end marijuana prohibition.

Photo credit: US Embassy Canada