Pot stocks have been in the spotlight recently as investors become increasingly optimistic that cannabis will become legal on the federal level in the U.S. In fact, the broader marijuana industry has been trending higher over the last 12 months, with the Horizons Marijuana Life Sciences ETF (OTCBB:HMLSF) up 110% year-over-year. Over the same period, the S&P 500 has rallied just 49%.

If marijuana is legalized on a federal level, that would certainly be good news for marijuana stocks, but it wouldn’t necessarily benefit Canadian pot stocks.

How Are Cannabis Stocks Doing?

A lot has happened on the legalization front since the November 2020 elections. In March, New York legalized adult-use weed. New Mexico voted to do the same. So too did Virginia.

A raft of other states could legalize marijuana in 2021, including Connecticut, Rhode Island, Delaware, Maryland, Pennsylvania, and even Texas.

You can’t blame investors for being excited about the prospect of legalized recreational cannabis in the U.S. Before the November 2020 presidential election, only 11 states plus Washington D.C., legalized the recreational use of marijuana. After the election, that number jumped to 15 states.

What about on the federal level?

In the run-up to the November 2020 elections, Senate majority leader Chuck Schumer said, “I am fervently committed to getting legalization done.”

With Democrats in charge of Washington, Schumer is making strides to put together federal marijuana reform legislation with or without President Biden’s blessing. “I want to make my arguments to him, as many other advocates will,” Schumer said. “But at some point, we’re going to move forward, period.”

It might not be that simple. Democrats might be running Washington, D.C. but Schumer needs every Democratic vote to legalize weed. And that isn’t a sure thing. Senator Jeanne Shaheen of New Hampshire is opposed to it as is Senator Jon Tester of Montana.

If Schumer can’t make that happen it could mean a years long delay before pot is legal in the U.S. Midterm elections are next year and the sitting party rarely does well. Republicans have said they have no desire to take up the mantle, even though 68% of U.S. adults are in favour of legalizing cannabis.

This could take the sales out of pot stocks.

Despite strong broad-based gains, many Canadian pot stocks have been posting weak numbers. It’s a different story in the U.S., where multi-state operators and growers have been reporting impressive results.

Wall Street is still optimistic about the near-term future of pot stocks, but if legalization measures stall, cannabis stocks could experience a sell-off.

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Pot stocks have gotten a lot of attention as more and more U.S. states legalize recreational pot. But there is a big discrepancy between U.S. pot stocks and Canadian marijuana stocks. Even with U.S. legalization facing hurdles, the trading experts at Learn-To-Trade.com understand some marijuana stocks will retreat during industry volatility while others will thrive.

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