U.S. Marijuana Legalization Sees Momentum Build; Share Prices Soar

U.S. Pot Legalization on the Way?

There’s one thing and one thing only on the minds of pot stock investors: the eventual federal marijuana legalization in the U.S.

Let’s talk frankly: the Canadian market is small potatoes.

Yes, it’s lovely that the drug was legalized in the country (marking Canada as the first major economy to end its pot prohibition), and it’s a proof-of-concept that legal marijuana companies can remain profitable even as market factors like a resilient black market and a global pandemic get in the way.

But the simple fact of the matter is that every weed stock investor is keenly aware that the future of the industry lies in the U.S., and in how fast U.S. pot legalization can be written into law.

Well, dear reader, we’ve seen some very heartening news on the front.

Senate Majority Leader Chuck Schumer has said that federal U.S. marijuana legalization will be a key priority in the current Congress. He’s backed by Senators Ron Wyden of Oregon and Cory Booker of New Jersey.

The three senators recently released a joint statement, saying that legislation would be forthcoming in the next few weeks.

“The War on Drugs has been a war on people—particularly people of color. Ending the federal marijuana prohibition is necessary to right the wrongs of this failed war and end decades of harm inflicted on communities of color across the country. But that alone is not enough,” they said. (Source: “Booker, Wyden, Schumer Joint Statement on Cannabis Reform Legislation,” United States Senate Committee on Finance, February 1, 2021.)

The statement continued, “As states continue to legalize marijuana, we must also enact measures that will lift up people who were unfairly targeted in the War on Drugs.”

This is a good reason for pot stock bulls to celebrate.

That’s because, as you may recall, the Democrats have total control of the House and Senate. Which means that, if they’re serious about getting marijuana legalization in the U.S. passed, we’ll see it enshrined into law before 2022.

And 2022 is an important year. That’s when the midterm elections will be held and we’ll potentially see Republicans win back control of one or both houses of Congress.

That means, if the Democrats are serious about this proposal, they’ll need to move fast.

“We are committed to working together to put forward and advance comprehensive cannabis reform legislation that will not only turn the page on this sad chapter in American history, but also undo the devastating consequences of these discriminatory policies. The Senate will make consideration of these reforms a priority,” said the joint statement, with “priority” being the operative word.

It’s worth noting that the Democrats only hold a razor-thin majority in the Senate. In other words, if even one Democratic Senator decides to hold out, that could present serious problems.

Conversely, there are a number of Republican senators who support U.S. marijuana legalization. Whether they’ll support a Democrat-led push for marijuana legalization in the U.S. is another matter entirely, and will likely revolve around what’s exactly in the bill.

For instance, many Democrats are pushing hard for the release of non-violent marijuana offenders from prisons across the country. They’re also pushing for the expungement of the criminal records of non-violent marijuana offenders, as well as investigating ways to ensure that communities of color—those most impacted by the decades-long War on Drugs—get a repayment of sorts through U.S. pot legalization.

It’s in those last two points that we could see some pushback from conservatives in the House and Senate.

Still, I don’t think such pushback is likely, and I believe that, if a marijuana bill reaches the Senate floor (a similar bill already passed in the House, albeit with a different membership), we’ll see federal weed legalization in the U.S.

This would likely send marijuana stocks soaring.

Pot stocks have already been on an incredible run in 2021. With the potential U.S. marijuana legalization providing a tailwind, we could see share prices skyrocket in the coming months.

Chart courtesy of StockCharts.com

The above chart of ETFMG Alternative Harvest ETF (NYSEARCA:MJ), a marijuana exchange-traded fund (ETF), shows that marijuana stocks have been booming this year.

That’s due to the dual political momentum boosters: Joe Biden’s ascension to the presidency and the Democrats’ victory in the Senate. Both events have propelled excitement as many analysts believe—yours truly, included—that federal U.S. pot legalization is now just around the corner.

While President Biden has never been a staunch supporter of weed legalization, he has, at the very least, promised to stay out of the way of the growing legal weed market in the U.S.

Biden could also remove the marijuana from its Schedule I designation—a designation it shares with drugs like heroin.

That, along with a laissez-faire approach to enforcing federal pot laws (something the Barack Obama administration pioneered), could finally lead to big banks being freely able to lend cash to marijuana companies. That could result in an influx of liquidity to the market, a buying frenzy, and huge gains for pot stock owners.

Analyst Take

The marijuana market is looking stronger than ever.

With U.S. weed legalization not only a very distinct possibility, but for the first time since I’ve covered this beat, an actual likely scenario, weed stocks are going to be receiving a lot of interest moving forward.

We could see some very big moves in the market whenever Biden chooses. And seeing as how he’s already begun governing more progressively than his past would suggest, it’s not outside the realm of possibility that Biden will single-handedly start a mass surge in share prices if he removes cannabis from its Schedule I designation while the wheels of democracy slowly turn in Congress.

As someone who has long been a huge marijuana stock bull, I can tell that, right now, the pot stock market has the potential to be the best we’ve ever seen—or will ever see again.