Say What? Maine's Governor Just Vetoed the State's Voter-Approved Recreational Marijuana Bill

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There's no coincidence that the marijuana industry is known as the "green rush." If you look at the sales figures behind legal weed, they've been soaring at an incredible pace. Cannabis research firm ArcView is estimating that compound annual growth in North America through the year 2021 could come in at 26%, leading to a nearly $22 billion market. This growth has been instrumental in attracting marijuana stock investors and pumping up valuations into the stratosphere.

We've also witnessed a steady shift in the way the public looks at cannabis. Both national pollster Gallup's and CBS News' most recent polls show support for legalizing recreational marijuana at an all-time high. Gallup's Oct. 2017 poll showed that 64% favor legalizing adult-use weed. CBS News' April 2017 survey showed similar support at 61%. Presumably, the more people there are in favor of marijuana's expansion, the more pressure that'll be placed on lawmakers in Washington to make changes to its scheduling, or risk being voted out of office.

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During the Nov. 2016 elections, we witnessed residents in nine states vote on a pot initiative or amendment in their state -- and it wound up passing in eight states. With the exception of a narrow defeat (48% to 52%) in Arizona for a recreational marijuana proposition, every other weed vote passed. This included the recreational approval of pot for California, Nevada, Massachusetts, and even Maine, the latter of which was by the narrowest of margins (about 4,000 votes).

Of these four states, Nevada began selling legal recreational weed in licensed stores in July 2017. Meanwhile, California, Massachusetts, and Maine are expected to begin selling legal cannabis to adults next year. Or are they?

Maine's governor just vetoed his state's recreational weed bill

This past week, Maine's Governor, Paul LePage (R), vetoed a bill sent to him by the state's legislature last month that would have officially legalized the sale of recreational marijuana. Once again, while this bill barely passed by 3,995 votes, it nevertheless did pass, and thus represents the desires of Maine's residents.

The primary reason for LePage's veto is the bifurcation of interests it would create between Maine and the federal government. As a reminder, marijuana is still a schedule I, and therefore illicit drug, at the federal level. LePage feels it wouldn't be prudent to invest time and money in developing Maine's recreational weed industry if the federal government decided to clamp down on the industry's expansion. Said LePage:

Additionally, the governor leaned on the growing opioid crisis within Maine as reason to be skeptical about adult-use marijuana. Opioid-related overdose deaths rose nearly 40% in 2016 to 378, according to the Washington Post. Interestingly enough, though, cannabis has often been touted as a solution to the opioid crisis since no cannabis overdoses in 2015 or 2016 led to the patient dying.

But what's particularly noteworthy about LePage's veto is that it came after the governor consulted with U.S. Attorney General Jeff Sessions, the most ardent opponent of marijuana's expansion. Sessions has intimated that a crackdown on the marijuana industry may be imminent, and LePage's reluctance to move forward with a bill his state's residents voted in favor of could provide one more shred of evidence that tighter regulations are indeed coming from the Trump administration.

The case against domestic marijuana stocks is growing

While LePage's veto might anger pro-legalization advocates, this isn't the only instance we've seen of a popular cannabis bill being shelved at the last minute. In May, Gov. Phil Scott (R) vetoed a recreational marijuana bill in Vermont that overwhelmingly passed in the state's House and Senate, and which would have likely received strong support among its residents. At the time, Scott noted his concerns about inadequate laws in place to curb and punish those who drive while under the influence of cannabis. However, Scott insisted he had no moral obligation to legal cannabis, which does seem at odds with LePage's view for the time being.

Though Gallup's latest survey did show that Republicans favor legalization for the first time ever (51% in favor), the GOP remains one of the greatest stumbling blocks for the legal marijuana movement. With Republicans so focused on tax reform and healthcare reform, there's no room left on the docket for considering marijuana reforms at the federal level.

A continuation of the current policy is bad news for investors looking to benefit from domestic pot stocks. As long as weed remains a schedule I substance, marijuana-based companies won't be able to take corporate income-tax deductions, and they'll have virtually no access to lines of credit, or even something as simple as a checking account. The deck is very much stacked against the retail investor succeeding in the domestic marijuana industry until we have a clearer idea from Sessions as to what he plans to do, or not do, with the budding legal weed industry.

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