Despite having some favorable legislation in the pipeline, cannabis stocks continue to struggle. As we look across the board on Tuesday, Aurora Cannabis (NASDAQ:ACB) and Canopy Growth (NASDAQ:CGC) are both down about 5.5%. Hexo (NASDAQ:HEXO) is faring a bit better, down about 4%, while Tilray (NASDAQ:TLRY) is down less than 3%. Still, bulls are desperate for a win right now, and today’s action is a bit baffling.
It comes on the heels of federal legislation being put forward in Washington. Today, the Subcommittee on Criminal Justice and Counterterrorism is meeting to discuss decriminalizing marijuana. The hearing is titled “Decriminalizing Cannabis at the Federal Level: Necessary Steps to Address Past Harms.”
The goal is to remove cannabis as a Schedule I controlled substance and expunge prior federal marijuana convictions. Further, lawmakers want to allow states to set their own cannabis laws. That’s all under the Cannabis Administration and Opportunity Act (CAOA), but there are also banking considerations.
That comes into play with the SAFE Banking Act. So far, cannabis companies have struggled, as banking laws have been murky in regards to the cannabis industry. The legislation “would prohibit regulators from terminating or limiting either deposit or share insurance of such a financial institution for the sole reason that it does business with a cannabis company.”
The chief sponsor of the SAFE Banking Act, Representative Ed Perlumutter said, “I think there’s a real opportunity to pass not as sweeping a piece of legislation as Schumer has introduced, but something that really will benefit the industry and make things safer.”
The SAFE Banking Act seemingly has more bipartisan support than the CAOA.
What’s Wrong With Cannabis Stocks Right Now?
Cannabis stocks have been terrible performers since topping out in early 2021. That likely comes as little surprise given the performance of growth stocks, tech companies, cryptocurrencies and other risk-on assets.
The ETFMG Alternative Harvest ETF (NYSEARCA:MJ) has fallen in 12 of the past 13 months. Canopy Growth is working on its 17th monthly decline in the last 18 months, and it’s down 17% in July. Hexo has fallen about 99% from its high. Same with Tilray, which is down 95.5% from its 2021 high.
All of this illustrates one thing: This group has been absolutely obliterated.
Can the Senate help turn things around? Yes, they can if some of these pieces of legislation go through. But if Congress can’t gain traction ahead of the summer recess next month, or if they fail to get anything passed by the midterms, then cannabis stocks may lose these catalysts for the time being.
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On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.