Cannabis stocks could soon get a big legislative jolt
A bowl of medicinal cannabis.
Justin Sullivan | Getty Images
Cannabis investors over the past 2 weeks saw a whipsaw, which would have been in great demand at Six Flags Park or Hershey Park. But it was painful to invest in such a volatile asset.
For the past fifteen months, the excitement surrounding legislative catalysts that would rerate the sector higher has been a constant presence in the market and brought periods of joy. It has made investors feel sick as the lack of follow up has left them feeling frustrated. It has been a rollercoaster ride for an industry with extraordinary growth and multiple ESG, lifestyle, and social trends.
The root cause of recent volatility was the enthusiasm generated by the Republican-led legislation package. It aims to legalize marijuana federally while leaving states free to manage social justice and criminal justice.
Media sources claimed that Nancy Mace (Republican from South Carolina) was the leader of a rival cannabis reform bill, called “The.” States Reform ActThis would be a scheme to speed up legislation and take the issue away from Chuck Schumer, the Democratic Party and other Democrats. Cannabis stocks rose dramatically. They were higher than half of their original levels by Nov. 15, when Congresswoman Mace held her press conference about the legislation.
Most cannabis stocks lost their gains after Nov. 23, with some hitting new lows, as traders began to regain control of the market and begin to see the possibility for realism in the short-term.
Although the investment story clearly seeks federal catalysts to help it grow, the States Reform Act might not be the package that will next raise cannabis stocks. This is the SAFE Banking ActThis legislation is also more urgent and could be more crucial for the industry. Investors should pay attention.
The Democratic Party has been largely failing to fulfill its pledges of passing significant cannabis reforms, even though it regained control over the White House in 2012. Ironically, Republican Congresswoman Mace revived the prospect of cannabis reform.
States Reform Act is a sensible approach to federally decriminalizing cannabis. It would allow states to regulate their cannabis markets. The federal government could regulate it like alcohol. Create a path to exonerate or release non-violent federal cannabis offenders. Provide veteran access to cannabis. Also, a 3% federal excise taxes on cannabis products.
The bill demonstrates that Republicans support federal cannabis reform. This is a well-reported fact. Mace’s legislation also comes at an incredibly opportune point, with the Senate set to vote on the National Defense Authorization Act this week. Although the Senate version of the NDAA passed in October contained the SAFE Banking Act, it is not clear if Senate Democratic leaders will permit SAFE to be included in the NDAA at the upcoming conference. The States Reform Act, a competing Republican initiative from Republicans may force Democrats to back SAFE Banking in NDAA. At this point, SAFE Banking is much more crucial for the industry.
It is encouraging that both Democrats and Republicans are laying the foundations for practical cannabis legislation. However, the SAFE Banking Act starts the complicated process of harmonizing federal and state cannabis laws. SAFE Banking provides access to financial services and banking to the market. This will allow capital to flow to the business (which is to be followed up by capital markets formalizations and the acclamation of exchanges). SAFE Banking will lift structural profit impediments imposed by IRS tax law on federally-illegal businesses. It will also revet the sector.
Investors may also be big winners if the cannabis industry passes its “first win” reforms.
Prepare for a battle between moderate Democrats in the Senate and Democrats in the Senate over cannabis legislation. Republicans in both legislative branches will be supporting SAFE in accordance with the NDAA, as well as the American people who are supportive of SAFE. reported record levels of supportRecent polls have shown support for federal cannabis reform.
It could be the last chance this year for the budding marijuana industry to have the financial resources it needs to grow and prosper. The Congressional leaders will have a platform to pass the NDAA, and then the SAFE Banking Amendment in order to push for more legalization reforms by 2022. Investors may win the battle as politicians push each other towards the places the market desires.
Tim Seymour, Portfolio Manager for The Amplify Seymour Cannabin ETF (CNBS), CIO at Seymour Asset Management, and a CNBC contributor is Tim Seymour
Brady Cobb, the founder and former CEO of Bluma Wellness/One Plant is a cannabis advocate.