The Dark Side of the Cannabis ‘Gold Rush’

June 30, 2021 5 min read

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Medicine, cooking and smoking — whatever the use, cannabis has been a big part of the press lately.

Cannabis is the most consumed drug in the world. According to a report by the European Monitoring Center for Drugs and Drug Addiction (EMCDDA), published in June 2018, more than 24 million people use it in Europe. Three quarters of consumers are between 15 and 34 years old. And while cannabis has proven to be addictive and detrimental to health, it has become so popular around the world that in some countries it has been legalized as a “recreational drug.”

“Green gold,” as it’s called today, is not only a drug, but also a source of profit in tourism, medicines, cosmetics and many other sectors. Even as the legalization of cannabis raises real public-health concerns, it generates a form of frenzy, excitement and even euphoria about the potential market.

The cannabis-industry study shows that in a healthy competitive market, prices are falling, product quality is improving, violence is decreasing and honest trade is taking the place of illegal transactions. While new studies regularly reveal the potential virtues of the plant, the stigmatization of medical and recreational consumption leaves room for a demand for a quality product.

A history of legalization

Production and sale of marijuana was first legalized in Uruguay in 2013. To combat the illegal trade of this well-known drug, the country chose to establish a state monopoly to offer cannabis at lower prices and higher quality.

Canada legalized it in June 2018, approving in majority Bill C-45, which authorizes the consumption and production of marijuana throughout the country. It was an election promise by current Prime Minister Justin Trudeau. And with this “yes” to cannabis, Canada became the first member of the G20 and G7 to open its doors to the recreational use of drugs (its medical or therapeutic use was already authorized in 2001).

Laws vary by state in the U.S. In nine of them — Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont and Washington plus District of Columbia — cannabis is permitted for recreational use. In 30 other states, marijuana is permitted for therapeutic purposes. But at the federal level, it remains illegal.

While in one state, Vermont, consumption was allowed by parliament, in other states, the decision was made by referendum, as in California, where in November 2016, the “yes” to Proposition 64 (or California Marijuana Legalization Initiative) won 57.13% of the vote.

There’s a lot of money in cannabis

Gone are the days of amateur gardeners hiding behind the kitchen garden, producing cannabis for personal use. While it is being gradually legalized in various countries, cannabis is whetting the appetite of investors and brokers, who see it as a lucrative source of investment.

Over the last three years, cannabis has become an increasingly important target for investors, mainly because of rapid changes in legalization and global opinion.

At present, 25 countries, including developed econonomies like Australia, Canada, Uruguay, Mexico, South Africa, Switzerland, Israel and Turkey, have legalized all or part of the market for recreational or medical purposes. And the list should grow in the next few years.

For now, the market is mainly focused on the United States and Canada, but even in Europe, it’s starting to move.

According to the French-American merchant bank, the legalized global cannabis market could reach $145 billion by 2028, compared with $12 billion last year.

Schroders’ Global Head of Sustainable Investment Andrew Howard said, “There are two types of companies investing in the cannabis industry: young companies specializing in this market and, increasingly, large consumer goods companies, who want to diversify their product portfolios.”

On Wall Street, this growing interest in the marijuana industry has triggered spectacular moves in recent months for young companies in the sector, like Tilray or Canopy Growth, whose stock has soared before dropping sharply.

While California has only recently legalized the purchase and use of cannabis for recreational use, distributors are entering the stock market.

Mike Tyson, a former boxer, bought several acres to grow the plant in Southern California, as has rapper Snoop Dogg. Bob Marley’s kids have also invested. In short, the industry is exploding.

Potential downsides to consider

But there is also some hesitancy — because to legalize all uses, you need concrete results.

What appears to be the triumph of the policy of decriminalization and legalization of cannabis also reinforces the blatant failure of the war on drugs.

Beyond that, there are health factors to consider: Cannabis disrupts brain function and reduces judgment, concentration and short-term memory, as well as the ability to perform routine tasks.

Moreover, according to the U.S. government body NIDA (National Institute on Drug Abuse), the use of cannabis in adolescents does something that alcohol does not do: It causes permanent damage to the brain, including the lowering of IQ.

So, while the drug’s profitabilty is undeniable, its increasing recreational popularity begs an important question: Do we want to make the same mistake with cannabis that we did with alcohol and tobacco?

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