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The grass is looking greener for investors

18.12.2020 Publications

What’s happened?

Global reform of Cannabis regulations and restrictions continues at a pace. In the last few weeks there have been two significant developments – both will surely have significant impact on the size of the cannabis industry and an impact on investors looking for an opportunity.First, as reported widely, the UN has reclassified cannabis as a less dangerous drug and removed it from 1961 Single Convention on Narcotic Drugs in a move that is seen as a green light for further research and development of cannabis based medical products. Second, the US Senate, has passed the MORE Act which is the surest sign of changing drug policy within the US with cannabis being removed from the Controlled Substances Act and a move towards legalisation in the States to support a growing domestic industry.

What does this mean?

You may think that the recent changes will mean that there will be a sudden surge in investment opportunities to investors outside the US. However, despite the change in the international classification and continued changes in the US – investment in the now maturing industry is still risky given the state of legislation in Europe, specifically the UK and Gibraltar.We have discussed before the opportunities and risks facing investors when they are seeking to invest in medical and recreation cannabis businesses in the US and Europe and the complex regulatory hoops they must jump through. The New York Times reported that the changes at an international level were a ‘diplomatic circus’ but that the “impact on the American and European markets was driving the issue” and that the market for medical and recreational marijuana will exceed $34 billion by 2025.

The complexity and risk stems from the significantly different attitudes to drug policy and legislative frameworks adhered to by the different governments of the world. This has led to risks for investors in the UK and Gibraltar as a result of legislation around controlled substances and money-laundering – where the risks and bureaucracy have so far outweighed the reward.Our team has been lobbying in Gibraltar for steps to be taken to change the laws and policies so as to enable investors to look for new growth streams following the Covid-19 pandemic and as Brexit comes to a head – meaning that investors will no longer be at risk of breaching money laundering regulations – for investing in the cannabis industry overseas.

If you are interested in how Triay & Triay can offer assistance and advice on how you can structure from Gibraltar to invest in overseas regulated cannabis businesses, or if you are interested in more information on how the proposed changes in legislation will impact businesses and enable you to mitigate existing risks contact the Financial Services team.

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