Cannabis Stock Investors Optimistic After House Votes to Decriminalize Marijuana

This is aclose up photo of a group of marijuana plants being grown in a greenhouse.
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The House of Representatives passed the “Marijuana Opportunity Act” (MORE Act) on April 1, a bill which would decriminalize marijuana at the federal level. News of a potential federal decriminalization triggered renewed investor optimism. The bill now goes to the Senate.

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The House voted 220-204 to pass the bill, mainly along party lines. Three Republicans sided with the Democrats in favor of the measure, while two Democrats voted against it, Barron’s reported.

The Street reports that among the beneficiaries of potential federal decriminalization is Tilray Brands, which climbed more than 500% in 2018 when cannabis was legalized in Canada. Tilray was, however, mostly flat in pre-market trading April 4, up 0.13%.

And according to Seeking Alpha, the legislative win marks another potential catalyst for the beaten-down cannabis sector at a time when both ETFMG Alternative Harvest ETF and AdvisorShares Pure US Cannabis ETF are trading more than 50% lower than the year-ago level. They were both up 0.7% in pre-market trading Monday April 4.

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“I applaud the House for passing the MORE Act and bringing us one step closer to decriminalizing cannabis nationally, a critical and urgent issue of equity,” Washington Governor Jay Inslee tweeted April 1.

Federal decriminalization could have major ramifications for cannabis companies. Said companies would no longer be subject to a section of the U.S. internal revenue code that prohibits taxpayers from deducting business expenses associated with controlled substances, Pedro Palandrani — director of research at Global X ETFs — told Barron’s.

In addition, decriminalization (and potential, eventual legalization) could unlock access to basic financing options, like loans and capital raising on U.S. exchanges, per Palandrani.

“Furthermore, the possible establishment of cannabis as a commodity with futures contracts and more relaxed regulations regarding land use for cannabis cultivation could also assist developing supply chain dynamics,” Palandrani concluded.

See: House Approves Marijuana Banking Reform Bill — What It Means for the State of Legal Cannabis
Find: Only 42% of Cannabis Businesses are Turning a Profit – Women and Minorities Fare the Worst

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The bill noted that 37 states, the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands have adopted laws allowing legal access to cannabis. Also, 15 states, the District of Columbia, the Commonwealth of the Northern Mariana Islands and Guam have adopted laws legalizing cannabis for adult recreational use. In addition, legal cannabis sales totaled $20 billion in 2020 and are projected to reach $40.5 billion by 2025, per the bill’s text.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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