In the quest to change U.S. cannabis laws, the House of Representatives hasn’t been much of a problem. The challenge has always come with the U.S. Senate…
Last week, though, Senate Majority Leader Chuck Schumer unveiled proposed legislation to decriminalize marijuana at the federal level that he wants to bring before the Senate. The bill already has the support of Senate Finance Committee Chair Ron Wyden (D-Ore.).
With the potential for major federal cannabis reform on the way, is it time to load up on marijuana stocks?
Lots of potential winners
As you might expect, there are lots of potential winners if marijuana is decriminalized at the federal level in the U.S. Canadian cannabis producers have long desired to enter the enormous market south of the border. However, they can’t do so and list their shares on major U.S. stock exchanges while cannabis remains illegal at the federal level.
If that roadblock is removed, Canopy Growth (NASDAQ:CGC) stands out as an especially likely beneficiary. Canopy already has an option to acquire U.S.-based cannabis operator Acreage Holdings. It has a big partner (and largest shareholder) based in the U.S. — Constellation Brands. Canopy could be the first to jump into the U.S. market if Sen. Schumer’s proposed bill becomes law.
Don’t overlook the opportunities for companies that currently operate in the U.S., though. Cresco Labs (OTC:CRLBF), for example, ranks as one of the most attractively valued multistate cannabis operators. One reason why Cresco’s stock is cheap compared to most Canadian pot stocks is that the company can’t list its shares on a major U.S. stock exchange.
It’s a similar story for Trulieve Cannabis (OTC:TCNNF), one of the biggest U.S. cannabis operators. If Trulieve traded at the same price-to-sales multiple that Canopy Growth does, its market cap would top $10.3 billion — a lot higher than its current market cap of $6 billion.
The Senate snag
Sen. Schumer’s support for federal cannabis reform removes one major obstacle from the past. When the GOP controlled the Senate, former Senate Majority Leader Mitch McConnell wouldn’t even entertain the thought of bringing a bill for major cannabis reform to the Senate floor.
However, there’s still a big potential snag in the Senate. Any proposed legislation that comes before the chamber can be held up by just one Senator who opts to use the filibuster. As a result, Sen. Schumer needs 60 votes for his bill to ensure that it goes through. It’s unclear that those votes could be scrounged up right now.
The Senate is split 50-50 between Democrats and Republicans (including two independents who line up with Democrats). That means 10 GOP votes would be required to prevent a filibuster if all Democrats and independents voted as a bloc.
Polls show that the American public supports cannabis reform. Thirty-five states have legalized medical and/or recreational marijuana. However, there’s no guarantee that enough Senators will vote along with their constituents’ views on this issue.
Don’t back up the truck just yet
With such political uncertainty in the Senate, investors probably shouldn’t back up the truck and load up on marijuana stocks just yet. That doesn’t mean, however, that…
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