California Cannabis Rush May Not Bring A Fortune For Stock Investors

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Summary

Recreational cannabis market is a difficult one for investors.

Legalization moves in California and Canada has brought a lot of excitement.

History of Growlife may be symptomatic of what is to come.

Selective medical marijuana plays a better bet than recreational ones.

New move by Attorney General Sessions has cast a pall over the sector.

The California Gold Rush of 1848 brought fame and fortune to a select few and trouble for many. Recreational cannabis may do the same. It was legalized in California as of 1st January. It will almost certainly be legal in Canada this coming July. This presents many traps for the unwary investor. The history of Growlife (OTCPK:PHOT) is an example of this.

New moves this week by Attorney General Sessions may cast a pall over the entire recreational cannabis sector. Medical marijuana looks a better play, especially GW Pharmaceuticals (NASDAQ:GWPH). Even that is not without its risks.

Government Policy

In a previous article, I gave details of how the Trump Administration could yet be a barrier for the cannabis industry. Many correspondents said this was not a risk and the movement was unstoppable. However, the news out of Washington this week shows that the concept of my article was correct.

Under President Obama, the so-called “Cole Memo” left it up to individual states to enforce cannabis laws. Now, a memo from the Attorney General’s office instructs federal officials to move actively against the those breaking federal law. The memo decrees that officials should:

“Disrupt criminal organisations, tackle the growing drug crisis and thwart violent crime.”

Sessions is well-known for his opposition to cannabis reform. He famously, and bizarrely, stated that the Ku Klux Klan was “okay until I found out they smoked pot”. He is also an advocate of States’ rights. He has now indicated that the Cole Memo will be rescinded. That would mean federal law officials could go into states where cannabis is legal and take action against companies and users. This would be under the purview of the Justice Department and the Controlled Substances Act. Cannabis is still a Schedule 1 drug, on a par with heroin. At present, the DEA (Drug Enforcement Agency) shows no inclination to turn back from its unsuccessful “War on Drugs”.

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