Pubdate: Tue, 10 Mar 2015
Source: Wall Street Journal (US)
Copyright: 2015 Dow Jones & Company, Inc.
Contact:  http://www.wsj.com/
Details: http://www.mapinc.org/media/487
Author: Thomas Dunford

INVESTORS SEE POTENTIAL OPPORTUNITY IN MARIJUANA REFORM BILL

Proposed Carers Act would redefine cannabis as a Schedule II
controlled substance

When Sens. Cory Booker (D., N.J.), Kirsten Gillibrand (D., N.Y.) and 
Rand Paul (R., Ky.) announced a bill Tuesday to reform federal marijuana 
regulation, they pitched it not just as a health, military veteran and 
states' rights issue, but from a business angle. And they used words 
that investors in the developing marijuana industry have been waiting to 
hear for a long time.

"This is very, very encouraging," said Alex Thiersch, a managing partner 
at Salveo Capital, a Chicago firm in the process of raising a potential 
$25 million fund to invest in marijuana businesses. "This opens many, 
many doors for us to pursue opportunities."

The proposed Compassionate Access, Research Expansion and Respect 
States, or Carers, Act would redefine cannabis as a Schedule II 
controlled substance from its current position under Schedule I, a 
classification that puts the drug in the company of heroin, LSD, peyote, 
methaqualone and ecstasy as having "no currently accepted medical use in 
the United States" under federal guidelines. It also would amend the 
Controlled Substances Act to allow states to set their own medical 
marijuana policies.

For marijuana businesses, this means private banks and other financial 
service providers would be free to open accounts for them without fear 
of federal prosecution. The Treasury Department and Justice Departments 
issued guidelines in 2014 allowing banks to provide services to 
marijuana businesses in states that had legalized it, but many banks 
remained skeptical as long as the federal restrictions remained on the 
books. Medical marijuana has been approved in some form in 23 states, 
the District of Columbia and Guam.

"I just came back from Colorado, and the biggest thing [marijuana 
entrepreneurs there are] asking me is `We want banking to be legal. 
We're legitimate enterprises now. We want to be able to put our money in 
a bank,' " Sen. Paul said at Tuesday's news conference disclosing the bill.

In an effort to make the pro-business case for the proposal, the news 
conference included a statement from Corey Barnette, the owner and 
president of Washington, D.C., medical cannabis cultivation business 
District Growers LLC, who enumerated the restrictions his company 
operates under federal law.

"There's no debt financing. There's no working capital. There are no 
credit cards. There are no corporate debit cards. That means that you 
don't buy anything over the Internet," said Mr. Barnette.

The federal law has prevented at least some direct investment in the 
industry. While Salveo is looking to pursue investments in growing and 
distribution operations, a larger firm with a portfolio of active 
investments, Privateer Holdings Inc., has limited its deals in the U.S. 
to ancillary businesses in the marijuana industry, such as Leafly, an 
online resource for information and reviews on cannabis dispensaries and 
strains.

"We're thrilled to see a bipartisan bill on this issue," said Brendan 
Kennedy, Privateer's chief executive. "For us, it would open up the 
possibility of direct investment in companies involved in the handling 
and growing of this product in the U.S."

Mr. Kennedy said his firm has looked at hundreds of U.S. companies 
involved in growing or distribution but won't invest in these businesses 
under current federal law. Privateer is involved in growing marijuana in 
Canada, where the firm operates its Tilray medical cannabis business in 
British Columbia. In January, Privateer received an investment from 
venture-capital firm Founders Fund, putting the company near a $75 
million fundraising goal.

While some other efforts to reform federal marijuana laws have failed in 
Congress, marijuana industry participants and advocates said there is 
reason for them to be optimistic about the bill.

"It's likely to have a good chance of passing," Mr. Kennedy said.

As with Salveo's Mr. Thiersch, Mr. Kennedy cited how the bill was 
crafted to appeal both to advocates for decriminalization on the left 
and to conservative proponents of states' rights and veterans issues. 
The bill could allow doctors at the Department of Veterans Affairs to 
prescribe cannabis.

"It has a real chance of making it through the Congress," said Ethan 
Nadelmann, executive director of the Drug Policy Alliance, a group 
advocating reform to drug laws. "Three years ago, it would have been 
unthinkable to have three nationally known senators sponsor what is 
essentially an omnibus reform bill for federal marijuana law."
- ---
MAP posted-by: Matt