What happened
Marijuana stocks lit up in early Friday trading, with shares of Tilray (NASDAQ:TLRY) gaining 8.6%, Aurora Cannabis (NASDAQ:ACB) rising 7.5%, and Canopy Growth (NASDAQ:CGC) growing 6.4% through 9:40 a.m. EST.
You can probably thank CNBC for that.
Image source: Getty Images.
So what
On Friday morning, the business news network reported on the status of a Republican-led cannabis legalization bill that U.S. Rep. Nancy Mace of South Carolina has been preparing to submit to the House of Representatives. As CNBC noted, marijuana “still is very much a macro story for investors.” Rather than one marijuana stock or another notably outperforming its peers, more often, they all move up or down en masse based on events and news that relate to the industry as a whole.
For shareholders, this news seems good.
As Marijuana Moment reported last week, Rep. Mace’s bill represents Republican buy-in to Democratic efforts to legalize marijuana at the federal level, trading confirmation of “states’ rights [to implement stricter controls over marijuana if they wish] and business interests” for an agreement to generally permit the drug to be cultivated, possessed, sold, and consumed. As drafted, the Republican proposal would, among other things:
- Legalize and regulate marijuana in a manner similar to how alcohol is regulated.
- Set a minimum age of 21 for recreational marijuana use.
- And institute a federal tax of 3.75% on cannabis, which would be levied on top of any state taxes.
Now what
This all explains why marijuana investors are getting excited by the first-term congresswoman’s proposal. Still, there are a couple of caveats and quibbles to bear in mind.
First and foremost, there’s the continued opposition to full legalization from President Biden, though he does support decriminalization and allowing cannabis to be used for medical purposes. As Marijuana Moment points out, “the president is personally against comprehensively ending prohibition,” and even if a bill gets through Congress, “whether he’d sign any Democratic- or Republican-led legalization bill is an open question.”
Second, we may be looking at a “too little, too late situation” here. As Reuters noted when reporting on the new bill earlier this week, “there are few legislative weeks remaining in this session of the deeply divided Congress.” Even if — against all odds — everyone in Congress ends up agreeing that marijuana should be legalized, it is “unclear how much lawmakers will be able to get done once the 2022 midterm election campaigns get started early next year.”
Long story short, CNBC is reporting today that this is “huge news for a market that was not expecting descheduling … before midterm elections and … clearly [it is affecting] the price of cannabis stocks.” But if investors are betting on marijuana getting legalized this year, or even next year, they could be in for a rude awakening.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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