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Canberra cannabis breakthrough: A sign of change or just hot air?
The majority of leading ASX-listed cannabis stocks rose in value this morning after the Australian Capital Territory (ACT) passed a bill yesterday to legalise the possession, consumption and cultivation of cannabis for recreational use.
But is the excitement justified? Opinions vary within this booming industry with some viewing Canberra’s move as a harbinger for other states, but others are sceptical about the true impact and whether the development may even damage the progress made by medicinal cannabis companies.
Dr Sud Agarwal, co-founder and CEO of Australia’s largest cannabis industry services provider Cannvalate, believes the playbook in Australia will be very similar to what is happening in the US market.
“As attitudes towards adult-use cannabis use soften and learnings about how to regulate this market in a safe manner are made, then I would expect other states to pass similar legislation as it is likely to be an easy tool for political parties will use to win over large numbers of the Australian electorate,” says Agarwal, who is also chief medical officer at Impression Healthcare (ASX: IHL)
“Victoria is the state most likely to change next, with a medicinal cannabis-supportive Labor government and a very active Greens Party led by Senator Richard Di Natale, who has historically been very vocal about his desire to legalise adult-use cannabis.”
The law is expected to come into effect in late January, allowing the cultivation of two plants per person or four plants per household, and possession of up to 50g of dried cannabis. Smoking of the substance will not be allowed in public places, and it cannot be grown hydroponically.
Agarwal notes that while Cannvalate focuses on medical and research-driven cannabis, it is highly likely that developments in Canberra will increase demand for the company’s services.
“We are already developing cultivation and manufacturing facilities for several large Canadian industry stalwarts who have entered the Australian cannabis industry with $20-50 million investments,” he says.
“We expect these companies to potentially increase the footprint of their projects and we also expect several more Canadian and international players to engage with us due to the increased demand for cannabis products in Australia.”
Despite this optimism, Agarwal and many other experts have raised concerns the law may have unintended consequences.
“One of the unusual aspects of the recently passed ACT legislation is the allowance to grow two plants per person within your own private property,” he says.
“Whilst I understand the intention behind this law, this does carry the risk of having low quality, unregulated, home grown cannabis enter the market which may end up in both the medicinal and recreational markets.
“There is a risk that this level of deregulation could create a parallel grey market allowing patients to choose home grown, non-medical grade products over high quality products made under pharmaceutical conditions because of financial drivers.”
Agarwal’s perspective is shared by Josh Fegan, founder and managing director of Althea (ASX: AGH), one of the country’s leading cannabis companies by market capitalisation.
Fegan says Althea’s concern is that individuals who are facing difficulty in accessing medicinal cannabis products due to the high level of regulation may view this as an opportunity for self-treatment.
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