Why Are Cannabis Stocks Up Today?

  • Cannabis stocks are surging today on reports of a potential decriminalization bill.
  • The bill is expected to be put to the Senate some time next week.
  • Odds are long for it to pass, but investors seem to like the direction of this move.
marijuana stocks Hand gently holding rich soil for his marijuana plants
Source: Jetacom Autofocus / Shutterstock.com

Today, cannabis stocks are among the leaders in the market. Marijuana producers Tilray (NASDAQ:TLRY), Canopy Growth (NASDAQ:CGC) and Green Thumb Industries (OTCMKTS:GTBIF) are all seeing increases between 5% and 13% at the time of this writing.

As many investors may suspect, there’s a sector-specific catalyst is behind this move. Reports indicate that Senate Democrats will soon introduce legislation aimed at decriminalizing cannabis at the federal level. This legislation is expected to be introduced some time next week. It could very well pave the way for decriminalizing weed.

Now, most of the enthusiasm around cannabis stocks has waned since President Joe Biden first took office. With a Democrat-controlled House and Senate, many had expected some movement on decriminalization — if not legalization — during the first half of Biden’s term. However, with mid-terms coming up, it’s unclear whether this majority will hold. Thus, the longer this legislation takes to be voted on, the less likely it is for anything to get done.

That said, this bill is certainly a step in the right direction for cannabis. We’re about to get some clarity on where politicians stand on this subject. That’s a good start. At least, that much is being reflected in cannabis stocks today.

Let’s dive into what investors may want to consider with this bill moving forward.

Are Cannabis Stocks a Buy on Potential Legislation?

It’s worth noting that this legislation hasn’t officially been put forward yet. Many tweaks have been made to the initial bill which was circulated last year. And, as mentioned, investors remain wary of the amount of time that has been spent trying to get a bill together.

Further, this so-called “long-shot decriminalization bill” still may not pass. In fact, some experts already believe it won’t. That’s because the Senate may prove to be less-enthusiastic about the legislation than the public.

The bill does shine a spotlight on cannabis decriminalization and legalization, however. Various states that have already legalized cannabis at the state level and seen significant tax revenues from doing so. Given growing concerns around the federal budget deficit, taxing cannabis certainly seems like a prudent move right now.

For now, cannabis stocks remain on watch. These companies are all down substantially from their peaks, so perhaps a nice rebound is in order at current levels.

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On the date of publication, Chris MacDonald did not hold (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.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.


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