With Congress passing the MORE Act on Friday, cannabis takes one step closer to complete legalization.
The U.S. House of Representatives on Friday passed the Marijuana Opportunity Reinvestment and Expungement Act of 2019 (MORE Act) to end the federal prohibition on cannabis. Though largely symbolic for now as it does not force states to legalize the substance, if put into law, it would be momentous for the emerging multibillion-dollar cannabis industry and broader social justice movements.
For now, the House is likely to be the last stop on the line for the MORE Act, as it is unlikely to pass in the Senate. However, as covered in a previous Fastball, a Joe Biden presidency could make complete federal legalization a reality soon.
What does this mean for pot stocks?
The Act will effectively legalize cannabis by removing marijuana from the Controlled Substances Act and creating a shared federal-state control of cannabis programs, while also reducing barriers to research, solving current banking and tax woes, expunging some cannabis offenses, and further diversifying efforts in the industry.
The lifting of these barriers will be a welcome boost ahead of the Biden presidency, following up from a rise in cannabis stock share prices since the election last month. For context, the leading pot stock ETF, ‘ETFMG Alternative Harvest’— another ETF with a clever ticker symbol, MJ — is up 35% since then.
We know that Biden has taken a favorable stance towards cannabis legalization, and the MORE Act’s passing is the House’s way of showing that it is willing to work with the president-elect. However, investors must not get ahead of themselves.
Even if this bill should pass the Senate eventually, there are still a lot of headwinds to pot stock growth:
- Almost none of the current crop of public pot companies are profitable.
- High taxes factor into U.S. sales prices.
- Scandal is not unheard of in the industry, just look up CannTrust Holdings and Namaste Technologies.
- There is intense competition in this industry, especially from Canadian firms, where it is legal.
However, recent months have shown us that the cannabis industry is getting some much-needed wins, and though still in its infancy and prone to volatility, there is a clear movement behind it that could help make it one of the largest legal recreational industries in the U.S.
For now though, it’s an industry for the high-risk investor.
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