First-Ever Medical Cannabis REIT Approved by the NYSE

According to the Form S-1 it recently filed with the U.S. Securities and Exchange Commission (SEC), Innovative Industrial Properties Inc. intends to raise $100 million in order to further the stated business purpose of "the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities." On November 17, 2016, the New York Stock Exchange (NYSE) approved Innovative Industrial Properties' application for listing on the NYSE. Innovative Industrial Properties is the first cannabis-focused company of its kind to be allowed to list on the NYSE.

The NYSE's approval of Innovative Industrial Properties' listing application is particularly significant in light of the United States' other national stock exchange, Nasdaq, repeated denials (most recently in May of this year) of MassRoots, Inc.'s attempts to list on that exchange. MassRoots is a social media company that is not involved in the production, cultivation or distribution of cannabis, whereas Innovative Industrial Properties' stated business purpose is to act as landlord and manager of medical cannabis facilities.

The SEC has been allowing public cannabis companies' registration statements to become effective since 2014, and as a result, there are hundreds of cannabis-related companies that are currently quoted on the OTC Markets Group, Inc.'s various marketplaces, such as the OTCQB. It remains an open question whether Innovative Industrial Properties' successful listing on the NYSE will lead a number of these OTC-quoted companies to attempt uplisting to national exchanges as well, including MassRoots.

Trump Appoints Sessions to AG

President-elect Donald Trump announced that he would nominate Senator Jeff Sessions (R-AL) as U.S. Attorney General. So what does this mean for the cannabis industry?

As Attorney General, Sessions will have the ability to set the top enforcement priorities for the United States Department of Justice (DOJ). During the Obama Administration, cannabis was not a priority, and the DOJ took a hands-off approach for those states with comprehensive regulatory schemes. It is possible that this hands-off approach could change with Sessions' appointment – with a potential for a total upending of the industry. In his previous role as a federal prosecutor, Sessions was known for a tough stance on drugs with a history of opposition to the cannabis industry, having recently been quoted as saying "good people don't smoke marijuana."

While Sessions has the industry nervous, it is possible that his appointment will not result in drastic change in enforcement priority for cannabis for several reasons. First, the Administration has indicated that its initial focus will be on plans for infrastructure revitalization, tax reform, the repeal of the Affordable Care Act (Obamacare) and immigration reform. They will also focus on the confirmation of their cabinet nominees, including Senator Sessions. If confirmed, Sessions will inherit a series of police accountability and racial justice issues. Thus, the Administration may not elect to address cannabis with so many other priorities on its plate, at least at the outset.

Second, cannabis is popular among voters. After the 2016 presidential election, 60 percent of Americans now reside in a state with some form of legalized cannabis, and with the exception of a few states, these legalization efforts were citizen-driven through ballot initiatives. For example, in Florida, a key presidential swing state, cannabis received more support at the ballot box than either presidential candidate – receiving more than 70 percent of the votes.

Third, cannabis is a booming industry that is currently projected to generate more than $20 billion by 2020. This economic boom, coupled with the high popularity of cannabis among voters, could make renewed enforcement and criminalization efforts bad politics.

Fourth, Congress, through amendments to the spending bill like the Rohrabacher-Farr Amendment, has prevented the federal government from taking legal or law enforcement action against patients and businesses complying with state laws and regulations for medical cannabis. Recently, the Ninth Circuit ruled that the Rohrabacher-Farr Amendment did, in fact, prohibit federal enforcement, so Congress could continue to legislatively tie the hands of the DOJ. The Rohrabacher-Farr Amendment was included in this fall's short-term spending bill that prevented a government shutdown on October 1, and it is likely that such an amendment will be proposed during the next round of budgeting (although under a different name due to the retirement of Rep. Sam Farr (D-CA)).

Ultimately, it still remains to be seen as to what Sessions' appointment may mean for the industry.