Canada’s Senate to Vote on Legalizing Marijuana Today

After a very, very long wait, the big day is finally here. After 14 months of debate, speeches, and voting on various amendments, today, Thursday, June 7, Canada’s Senate will be voting on whether or not to pass bill C-45, or as the bill is more commonly known, the Cannabis Act.

While complex, the Cannabis Act has one purpose: to legalize recreational marijuana. Should the Cannabis Act be signed into law, it would allow Canada to become the first developed country in the world to have legalized adult-use marijuana. Uruguay is the only country to have previously legalized recreational weed.

Of course, today’s vote won’t be a cut-and-dried event. Here’s what you, the casual observer or perhaps pot-stock investor, can expect of today’s vote and what’s to follow.

Image source: Getty Images.

Will bill C-45 pass?

Though nothing is a certainty in the political world, I struggle to see how this bill won’t pass the Senate after 14 months of arduous debate.

In total, of the 105 seats in Canada’s Senate, 13 are currently vacant, and 32 are held by Conservatives. This means the more progressive Independents (43 seats) and Liberals (11 seats) hold a clear majority. Conservatives, no matter how concerned they are about adolescent access to cannabis, or how legalization could affect driving under the influence laws, have no way of stopping this bill from passage without the assistance of Independents and/or the six non-affiliated senators.

What happens if bill C-45 passes?

Should the Cannabis Act receive a passing vote in the Senate, it would once again be ushered back to the House of Commons for vote. Just as in the United States, when changes are made to legislation, it has to be ratified by both houses of Congress prior to being sent to the president’s desk. With the Canadian Senate adopting a number of changes, bill C-45 will be sent to the House of Commons for vote.

It’s possible the House of Commons is pleased with the current bill, passes it, and sends it to Prime Minister Justin Trudeau’s desk to be signed into law. It’s also possible that the House of Commons makes adjustments of its own, which would once again mean sending the bill back to the Senate for another vote. Should this latter scenario occur, it has the potential to delay the launch of recreational weed sales.

Image source: Getty Images.

What happens if bill C-45 doesn’t pass the Senate?

Should my thesis prove all wet, and the Cannabis Act fails to garner enough votes today, the bill would essentially be dead, and debate would once again begin in the House of Commons. While such a scenario seems unlikely, it would probably create nothing short of a wipeout in marijuana stocks should bill C-45 be voted down.

When would legal weed sales commence?

Here’s the tricky thing about today’s Senate vote: There will likely be a considerable amount of time between the (expected) passage of this bill and the first legal sales of adult-use weed. Originally slated to go on sale by July 1, 2018, Canadian regulators have suggested that sales aren’t likely to commence until eight to 12 weeks post-legalization. The delay is needed to allow time for growers to get their crop into retail dispensaries, as well as allow each of Canada’s provinces ample time to get their regulatory infrastructure in place.

Image source: Getty Images.

Is legalization uniform throughout Canada?

Actually, no, it isn’t. Though there are certain laws established by the Cannabis Act, such as how many plants may be home grown in a residence, or how much cannabis an individual may possess, other aspects of regulation can be completely different depending on the province.

For example, Alberta has set the legal age of consumption at 18 and over, whereas every other province went with 19 years of age and up. Certain provinces, such as Quebec and Ontario, won’t allow private retailers to operate dispensaries. Meanwhile, the opposite can be found in Saskatchewan, with no government-operated stores in the province. In other words, legalization will be somewhat piecemeal, just as it is in U.S. states.

What are the taxes on legal weed, assuming the Cannabis Act is passed?

In October, lawmakers proposed taxing legal cannabis at $0.77 (1 Canadian dollar)-per-gram up to $7.70 (CA$10), and a flat 10% excise tax on more expensive strains. By December, the federal government had struck a two-year tax-sharing agreement with all provinces expect Manitoba. Under the agreement, provinces will receive 75% of collected tax revenue for the first two years, with the federal government netting the other 25%. Provinces are getting a larger piece of the pie since they’re on the front lines of regulation, not the federal government.

It’s worth pointing out that this relatively low excise tax rate is going to be critical in regard to competing against the black market. A roughly 10% excise tax is nothing compared to the 50% to 80% tax Canadians typically pay on beer, wine, and liquor.

Image source: Getty Images.

What does legal recreational marijuana mean for Canada’s weed industry?

Should Canada’s Senate vote in favor of the Cannabis Act, the House of Commons also do so, and Prime Minister Justin Trudeau sign the bill into law, it’s expected to add $5 billion to the legal Canadian cannabis industry a year, if not more. Since there is no precedent to legalizing adult-use weed, no one is entirely certain of what to expect. But the key point here is that sales growth and demand are expected to explode higher.

Is it time to buy marijuana stocks?

I’m still sticking with “no” for the time being. Most pot stocks have already been thrust into the stratosphere on the expectation of bill C-45 passing. However, the work is just beginning for these publicly traded companies. Many won’t be significantly profitable for at least a few more years, and quite a few are crushing their shareholders under the effects of dilution via bought-deal offerings. These capital raises are something of a necessary evil for an industry with no traditional access to capital. In short, until the industry matures, it’s probably best to remain on the sidelines.

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