A move by the U.S. Attorney General to rescind an Obama-era policy that allowed legalized pot to flourish south of the border dealt a blow to marijuana stocks today, but observers and industry players say the crackdown is a boon for the Canadian cannabis industry.

U.S. Attorney General Jeff Sessions today rescinded the 2013 Obama administration guidance that suggested the federal government would not intervene in states where the drug is legal, which has opened the door for several U.S. states to legalize pot for medical and recreational purposes.

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But in a memo today, President Donald Trump’s top law enforcement official said he will instead let federal prosecutors where marijuana is legal decide how aggressively to enforce federal law, which still prohibits the cultivation, distribution and possession of the drug.

Several marijuana stocks saw a double-digit pullback on the news, with Canada’s biggest licensed producer Canopy Growth down as much as 19 per cent before regaining lost ground in the afternoon.

But Echelon Wealth Partners analyst Russell Stanley says if marijuana continues to be illegal at the federal level, this will suppress the rise of any large U.S. cannabis companies to challenge Canadian marijuana producers, allowing them to continue expanding internationally outside of the U.S. with little competition.

Eileen McMahon, chair of intellectual property and food and drug regulatory practices at Torys law firm, says the U.S. Attorney General’s stance also creates more opportunities for cannabis companies purely focused on Canada.

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