Cannabis stocks just had one of their best weeks of the year after getting some much-needed good news on federal legalization.
On Thursday, Marijuana Moment reported that representative Nancy Mace (R-SC) is circulating a bill called the States Reform Act that would legalize and tax recreational cannabis at the federal level.
Here are some more details from Marijuana Moment.
A new Republican-led congressional marijuana legalization bill is imminent, Marijuana Moment has learned. The measure is being framed by advocates as a compromise between simple descheduling as proposed by other GOP lawmakers and wide-ranging comprehensive legislation that Democratic leaders are championing.
Marijuana Moment obtained text of the draft legislation, which is being led by Rep. Nancy Mace (R-SC). The measure, titled the States Reform Act, is currently being circulated among stakeholders for feedback and is therefore preliminary, but a final version is expected to be officially filed later this month.
Why This Big A Win For the Industry
The emergence of this Republican-led cannabis bill is a big win for the U.S. cannabis industry for four reasons.
#1 – Competition for the Democrats Bill
The legislators who finally get legalization across the goal line are going to have a huge win for their careers and resume. It’s a very big prize.
This new bill just showed the Democrats that the Republicans are serious about competing for the prize of legalization. This new bill sharply increases the pressure on Democrats to pass some cannabis bills. It would be a huge loss for the Democratic party to let Republicans get the win on cannabis legalization.
#2 – This is a Cannabis Friendly Bill
The new Republican bill is friendly to the cannabis industry. For example, this new bill proposes a 3.75% federal tax rate on cannabis, in line with similar industries such as tobacco and alcohol.
This is a sharp contract to Schumer’s bill, which calls for a 10% federal tax that scales up to 25% in a few years.
#3 – Legislators Showing Political Will
This is another indicator that politicians are getting the message that the majority of U.S. citizens want cannabis to be legalized and taxed.
According to a recent poll from Rasmussen, 62% of Americans support legalization. This new bill increases the probability of reform in the next 12 months.
#4 – Bipartisanship Support on Display
Democrats have historically been much more friendly to the cannabis industry than Republicans. However, that has been evolving quickly in the last few years.
According to a recent survey from Rasmussen, 54% of Republicans support legalization. This still trails Democrats’ support at 68%, but it’s a sharp improvement that is now the majority.
How did Cannabis stocks respond?
The new cannabis bill gave cannabis stocks a solid jolt.
The Advisorshares U.S. Cannabis ETF (NASDAQ: MSOS) gained about 20% in five days, one of its best weeks of the year.
However, despite the nice jump, cannabis stocks are still down around 50% from the 52-week high. Take a look at the 2021 chart below of MSOS.
What Should We Expect Moving Forward?
The new Republican-led cannabis bill is a positive development for the U.S. cannabis industry.
This bill has a chance of getting passed with support from both sides of the aisle and it also increases pressure on the Democrats to get a bill of their own passed.
The path forward will be volatile but this is a step in the right direction because it increases the probability of cannabis reform in the next 12 months.
About the Author & Cannabis Stock Trades
Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.