Why Investors Can Be Cautiously Optimistic About Big US Cannabis Reform

Canadian cannabis operators like Canopy growth (NASDAQ: CGC) eagerly awaiting the opportunity to enter the US cannabis market. US cannabis operators like Curaleaf (OTC: CURLF) want to list their shares on the major US stock exchanges. Neither group will grant their wish until the major federal cannabis reform is passed in the United States

In this Motley Fool live video recorded on June 11thOlivia Zitkus, editor of the Health and Cannabis Bureau, and Keith Speights, editor of the Motley Fool, discuss why investors can be cautiously optimistic about the prospects for such reform.

Olivia Zitkus: Let’s start with broader industry news. I am curious to see whether you have noticed anything in the past few weeks. I know that House Democrat Jerry Nadler introduced the MORE Act on May 28th, the Marijuana Opportunity Reinvestment and Expungement Act, which would abolish criminal penalties, clear criminal records, and create programs that focus on community repair while legalizing marijuana federally.

Do you notice anything here? Do you have any thoughts on the MORE Act and what is going or not moving in Congress?

Keith Speights: Well, Olivia, every time we talk about the United States Congress there is great uncertainty. [laughs] I think a lot of investors these days are probably rightly more optimistic about the potential for major cannabis reform than they were in the past. I think optimism is reasonably justified because the odds are better than in the past.

But anything can still happen, and there is simply no guarantee that this MORE Act or other major cannabis reform laws will actually be passed. The subject is of course easy to get through the house, relatively simple. In fact, we’ve already seen some major cannabis laws passed in-house.

It’s the Senate where things get rocky because the Senate is still 50:50, it’s split right between Democrats and Republicans, and so the vote goes to Vice President Harris. The Democrats have very thin control. Democrats tend to be more positive about cannabis reform. The real question will be what happens if one of these bills gets into the Senate.

There is always the possibility that Republicans will do filibuses and prevent anything from even going to the vote. It’s a real possibility.

I think there is at least a chance that the GOP is not trying to thwart cannabis reform. The reason I’m saying this, if you look at this, is that the majority of the U.S. states have now legalized cannabis in some form and these senators represent those states, and so I think there is at least some outside chance that we won’t see a filibuster. If any bill gets into the Senate that is sane, and I think the MORE bill is sane, I think the votes could be there to get it passed. We will see.

Seat cushion: I think this is a great way to look at it. I think this is something to just have to wait for. You can’t predict what’s going to happen. I think it was precisely this law that made it into the Senate last year, where it failed. Companion Bill died there.

But a second bill is to follow this year. That was already backed by Senate Majority Leader Chuck Schumer, Cory Booker, names many people know, and they may think this MORE bill is not doing enough right now.

You even have other Democrats saying it’s doing enough and then asking Republicans if it’s doing too much. But yes, you are absolutely right, there are a lot of red states, you might call them red states, out there with agents who think they could benefit from something like the MORE Act too.

Speights: Law. Medical cannabis in particular is quite popular with Americans, even more so than recreational marijuana.

Seat cushion: Yes.

Speights: I don’t know if even among GOP senators you will see enough opposition to something that is too controversial. I don’t think some of the cannabis reform efforts that are going through the house are overly controversial, so we’ll see. I think there is reason to be cautiously optimistic, but don’t necessarily expect anything to happen this year.

Seat cushion: Total. All right, noted. Yeah, it’s pretty cool, you see, Alabama just legalized medical marijuana, I think that’s it, right?

Speights: That’s true.

Seat cushion: North Carolina is looking pretty good too. As far as I can tell, there are at least a few rumblings.

Speights: Olivia, I’ve always compared what’s going on in the cannabis market to what’s going on in state lotteries over the past few decades. It started with only one state or two running a state lottery, and then some of the states realized, “Our neighboring states make some money here,” and so they started thinking, well, maybe we could do it, and something like that or two other states did.

Then it’s like dominoes falling. More and more states did it. I think we’re seeing the exact same thing, especially with medical cannabis, with so many states legalizing medical cannabis, but also with recreational use.

Seat cushion: Total. I’m in Pennsylvania right now, wedged between – sort of – New York and New Jersey, both of which are now launching recreational cannabis. Losing tax revenue from cannabis is perhaps a top, if not the # 1 consideration, especially after the coronavirus pandemic, in terms of whether or not it’s a good choice for recreational legalization.

Speights: If there is one thing states are really looking for, it is more money.

Seat cushion: Yes, 100%. I like that. These are our findings from the industry. Follow the Money, this is your industry tip for today, fools.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

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