US attorney general Jeff Sessions aims to clamp down on recreational cannabis, causing a (seemingly brief) rout in marijuana-related stocks. A US exchange-traded fund for pot companies that had been gobbling up cash fell as much as 9% today (Jan. 4).
California residents only had a few days to enjoy legalized marijuana before the Trump administration began closing a gray area that allowed the industry to flourish in some states. The ETFMG Alternative Harvest ETF took the news hard at first but regained some of its losses: It was down about 3% to $36.51 at the time of writing.
The fund changed its investment focus from Latin American real estate in late December and money began pouring in, rising to more than $80 million in assets from about $5 million, according to FactSet data. The share price of the ETF’s biggest US holding, Isys Therapeutics, fell more than 15% today.
Cannabis is still classified as a controlled substance by federal law, but a directive to federal prosecutors called the Cole Memo (pdf) has allowed the industry to take root in more than half of US states. The Associated Press reported that Sessions plans to rescind that directive, which urged prosecutors not to prosecute state-sanctioned cannabis distribution and production.
While Sessions has long been an opponent of legalized pot, the multi-billion-dollar marijuana industry likely won’t give up without a fight.
Additional reporting by Tim Fernholz