Russia, security concerns are piling onto marijuana stocks

It has been a rough week in international affairs. Even the cannabis sector, which has unique political problems of its own, felt the impact of Russia’s invasion of Ukraine.

Pot investors can’t tune out Kremlin’s aggression

Two political imbroglios for the cannabis industry have added to its usual legislative woes.

Sanctions against Russia following its invasion of Ukraine and a White House memo about marijuana stocks upended the industry last week, sending the AdvisorShares Pure U.S. Cannabis exchange-traded fund down 9.6% over five days.

Canadian shares of Curaleaf Holdings Inc., the dominant U.S. cannabis company by market share, lost 17% last week after a flurry of posts on Twitter that raised concerns about the company’s ties to Russia. Its executive chairman and largest shareholder, Boris Jordan, is also a founder and chairman of two large Russian companies: Renaissance Insurance Group and investment firm Sputnik Group. Another large shareholder, Andrey Blokh, holds dual citizenship in the U.S. and Russia.

“The speculation on social media that the company and its major shareholders and executives will somehow be subject to any U.S. government economic sanctions now or in the future is incorrect,” Curaleaf said in a statement on Feb. 25, noting that Jordan is also a U.S. citizen.

Blokh and Jordan’s history with Russia is old news, well understood by Curaleaf investors for years. A Curaleaf spokeswoman said the company can’t speak to Jordan’s other investments, and that he won’t be discussing concerns about Russia sanctions.

Later in the week, the industry got its second dose of political headwinds after Politico re-upped prior reports about the Biden administration discouraging people who are seeking security clearances from investing in marijuana companies. The December memo from Avril Haines, the director of national intelligence, says that investments in pot stocks “could reflect questionable judgement and an unwillingness to comply with laws, rules, and regulations” and could limit a person’s eligibility to access classified information or hold sensitive positions.

The guidance “represents a de facto ban on legal cannabis investments for the nearly three million Americans with active security clearances, not to mention hundreds of thousands of current and prospective applicants,” Steven Hawkins, head of the U.S. Cannabis Council, said in a March 3 statement.

He said limiting legal investments will only encourage more illegal activity.

“Criminals are the only people benefiting from the Schedule I status quo, including the gangs and cartels that fuel the nation’s estimated $65 billion illicit market,” Hawkins said.