Recreational cannabis has only been legal in Canada for three years, but the North American pot industry has already had its fair share of ups and downs, from eager investors sending pot stocks soaring in the leadup to legalization, to industry scandals, underwhelming sales, mounting debt, and strong sales during COVID-19.
Things started to look interesting in the leadup to the 2020 U.S. elections, with the Democrats saying they wanted to get cannabis legalized on the federal level. On the campaign trail, Kamala Harris said she wanted to end the federal prohibition of cannabis and was the lead Senate sponsor of the Marijuana Opportunity, Reinvestment, and Expungement (MORE Act).
Then Senate Minority Leader Chuck Schumer said, “I am fervently committed to getting legalization done.” He went on to say that he would get it done with, or without, President Biden’s blessing.
When Will Recreational Cannabis Be Legal in the U.S.?
The Democrats may have taken the White House, Senate, and House of Representatives, but their promises of legalizing adult-use cannabis have gone cold. And that inactivity has sent cannabis stocks into a tailspin.
Between mid-February 2021 and the start of November, the AdvisorShare Pure U.S. Cannabis ETF (NYSE:MSOS) cratered more than 50%. Over the same time frame, the S&P 500 advanced 17%.
Despite the short-term correction, the outlook for the pot industry burns bright. In 2020, U.S. cannabis sales soared 50% year-over-year to $20 billion. By 2025, USA cannabis sales are projected to top $40 billion. Over that six-year period, U.S. cannabis sales are projected to expand at a compound annual growth rate of 12.2%. The global cannabis industry will experience even greater growth.
Why Have Pot Stocks Rebounded?
Things are looking up in the cannabis industry right now. U.S. and Canadian pot stocks have been on a tear since the start of November, following a flurry of new legislation and potential legalization.
On November 4, a House committee approved a bill that would require the Department of Veteran Affairs to conduct clinical trials into the therapeutic benefits of cannabis for military veterans.
The next day, the House of Representatives approved the $1 trillion infrastructure bill that sets aside funding for scientific research into marijuana. The bill just needs to be signed by President Biden’s desk to become law.
These are certainly both positive steps, and have helped juice cannabis stocks, but what marijuana investors are really excited about is a Republican-led bill to end the prohibition of cannabis on the federal level.
A leaked draft of the bill, called States Reform Act, led by Republican Nancy Mace (Rep.-SC), is an alternative to the Democrats’ efforts and aims to federally legalize cannabis sales. The draft legislation would federally reschedule marijuana from the list of controlled substances and impose a 3.75% excise tax on cannabis sales. The bill has not yet been introduced to the U.S. House of Representatives, but a final version is expected to be introduced in the coming weeks.
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Once depressed North American cannabis stocks have rebounded on word the Republicans will soon be introducing a bill that would legalize recreational cannabis on the federal level. If the bill gets tabled in the coming weeks, there’s a good chance it could become law over the coming months. As the largest cannabis market in the world, U.S. legalization would be a boon for marijuana stocks. Not all cannabis stocks are created equal, some will do better than others. The trading professionals at Learn-To-Trade.com can show you how to separate the weed from the chaff.
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