Perhaps more than any other stock listed in the U.S. market, the fate of Canopy Growth Corp (NYSE: CGC) stock rests in the hands of the U.S. government. Canopy can be successful with or without U.S. cannabis legalization. But CGC stock needs America to legalize cannabis. In anticipation of U.S. legalization., CGC stock price is already extremely high relative to its current business.
Canopy recently committed $3.4 billion to a buyout of U.S. cannabis producer Acreage Holdings (OTC: ACRGF). Of course, the deal is contingent upon U.S. legalization of cannabis.
Experts disagree on how many years it will be until the U.S. legalizes cannabis. But political pressure for legalization is mounting. The most recent polls by Gallup, Pew, Quinnipiac and others consistently suggest more than 55% of Americans favor legalization. However, cannabis may end up being one of the centerpieces of the 2020 U.S. presidential campaign. If it is, the 2020 election may be a win-win for the owners of CGC stock.
The Strengthening the Tenth Amendment Through Entrusting States Act of 2019 (STATES Act) is the key for Canopy Growth stock. The bipartisan bill is co-authored by Democratic presidential candidate Senator Elizabeth Warren. The STATES Act would essentially remove the federal government from cannabis regulation, leaving the issue up to individual states. The STATES Act would eliminate much of the risk from the cannabis business within the U.S. Today, U.S. cannabis producers are operating illegally under federal law, which conflicts with state laws that legalize cannabis.
The STATES Act would potentially open up the flood gates for U.S. cannabis production. More critically, it would also free up banks to lend to cannabis companies. The National Association of State Treasurers recently adopted a resolution calling for “common-sense federal laws and regulations” for cannabis companies that are operating in accordance with state laws. Banks are itching to fund cannabis companies. The owners of CGC stock are chomping at the bit for Canopy to exploit its first-mover advantage in the U.S. market.
What 2020 Means For CGC Stock
Historically, the U.S. Democratic Party has favored cannabis legalization, while Republicans have opposed it. However, Piper Jaffray analyst Michael Lavery says that dynamic may shift dramatically in the 2020 election campaign.
Lavery says cannabis could become one of the top five central issues of the campaign. Surprisingly, he says President Donald Trump may be forced to throw his full weight behind legalization.
“By supporting cannabis, Trump may be able to incrementally broaden his appeal with swing voters without alienating his base,” Lavery says.
Trump’s ultimate opponent will be one of the primary factors determining whether Trump supports legalization.
Joe Biden is currently the front-runner for the Democratic nomination, according to PredictIt. Biden hasn’t been particularly supportive of the legalization movement in the past. In fact, Biden would potentially be a worst-case scenario for CGC stock price.
However, Warren has rapidly closed the gap with Biden in the past three months and is now his strongest opponent. Warren would be a best-case scenario for CGC stock. Given that Warren is the co-author of the STATES Act, Lavery says her nomination would force Trump’s hand on cannabis.
In fact, there’s even a scenario in which Trump could attempt to steal political credit from Warren on cannabis. If the STATES Act stalls in the Republican-controlled Senate, Trump could swoop in and get the job done.
“Mitch McConnell is a roadblock for legislation in the Senate, but Trump could use executive orders between now and the election to show support for the industry, potentially relating to cannabis banking or medical research,” Lavery says.
The Bottom Line on CGC Stock
Canopy Growth Corp is the best-positioned marijuana stock to benefit from U.S. legalization. However, the owners of CGC stock may not need to wait until November 2020 to see progress. They also may not need a Democrat to win the election. If Warren or another pro-legalization candidate gets the Democratic nomination, President Trump may use cannabis legalization as a political strategy in the election. In other words, Canopy Growth stock could be a big winner of the 2020 election, regardless of who wins the White House.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.