Marijuana News Today
We’re seeing two simultaneous pushes for U.S. marijuana legalization in the marijuana news today, with one federal bill and one state-level bill in Illinois being introduced.
Both would see U.S. marijuana legalization expand rapidly, although, of course, the federal bill is the juicier of the two.
The new federal S.420 proposal put forward by Senator Ron Wyden would establish a federal excise tax on marijuana sales, remove it from the Controlled Substance Act, and create a system of permits that would allow businesses to engage in the marijuana trade. (Source: “Feds Would Tax Marijuana Under New Senate Bill Actually Numbered S. 420,” Forbes, February 8, 2019.)
A couple of other bills were put forward as well.
S.421 would see the disparity between federal and state law regarding marijuana shrink, allowing state businesses that engage in the marijuana industry more options when it comes to banking, advertising, and several other restrictions that are in place due to the federal prohibition.
Another bill, S.422, would eliminate the federal ban that prevents businesses involved with marijuana from taking advantage of the normal business tax deductions that are typically available.
Being an anti-tax bill, as you’d imagine, S.422 has the most support from both sides of the aisle.
It’s unclear just how the voting breaks down for the marijuana bills. There are several Republican senators who have signaled their support for marijuana reform in the past. On the flip side, several Democrats have yet to warm up to the idea of U.S. marijuana legalization.
But this will be the first time that the bill hits the new House, controlled by Democrats.
If the bill succeeds in the House, which is by no means a guarantee, there are potentially enough Senate votes to see action on the bill. From there, it does not appear that President Donald Trump would veto the bill.
A lot has to go right for this all to work out, and there are still plenty of lawmakers who push against marijuana legalization. Still, it’s fair to say that this is the closest to U.S. marijuana legalization we’ve ever been in recent history.
On a smaller scale, we have a bill being introduced in Illinois that is likely to be the precursor for a more pared down bill to come later in the year.
The next marijuana proposal in Illinois is likely to be more restrictive. And, as is the norm, lawmakers will go back and forth on taxation, advertising, regulation, supply, licensing, etc. (Source: “First bill emerges this year to legalize marijuana in Illinois — would allow up to 24 plants at home,” Chicago Tribune, February 8, 2019.)
In any case, it appears that, by the end of 2019, Illinois could join the growing club of states where marijuana is legal.
That means we could see as many as three states push through pot legislation by the end of the year.
While it was busy in the marijuana news today, it was rather slow on the pot stock market.
Many stocks are seeing one or two point moves, with little in the way of wild swings in either direction to start the day.
Canopy Growth Corp (NYSE:CGC) fell a percent to start the day and finds itself down about five percent over the past week as the pot stock market took its first real hit of 2019.
Apart from the immediate stock market news, however, Canopy has a lot to celebrate today.
The company came out with an ambitious plan that I believe will pay dividends down the line.
With the Agriculture Improvement Act of 2018 legalizing hemp production in the U.S. and licensing secured by the company in January to produce the cannabis plant in New York, Canopy initially wanted to invest in the range of $100.0 million to $150.0 million.
It has since changed those plans, upping the number substantially, with a $500.0-million investment in the U.S. hemp market by adding production to two or three states in addition to New York.
“We’ll do it state by state right now, because what has to happen is the state needs to regulate what is permissible for CBD,” said Canopy CEO Bruce Linton.
“So we’ll probably have three or four states that have big populations and progressive leadership who want to have hemp become part of their actual job creation industrial platform.” (Source: “Exclusive: Canopy Growth to invest up to $500 million in hemp production in U.S. states,” Yahoo! Finance, February 7, 2019.)
This is one of the major events I’ll be watching in 2019.
While we don’t have legalization on the horizon like in 2018, the move into the U.S. hemp market represents the first real opportunity that the largest marijuana stocks in the world have to expand into the largest market in the world.
Should this move prove successful, CGC stock will receive a healthy bump as sales will likely skyrocket for certain products. After all, if Canopy can expand to, say, California, that would effectively be like adding another Canada to its potential consumer base.
Of course, hemp is not marijuana, but cannabidiol is quickly becoming the new health craze across not only the U.S., but the whole world.
Considering that new products like cannabis-infused beverages could also help push sales, you have one of the most exciting plays of the year unfolding before our eyes. That makes CGC stock very desirable.
In a similar situation to CGC stock today we have Tilray Inc (NASDAQ:TLRY).
Dropping two percent in early-morning trading today, TLRY stock is also down about five percent over the week.
Unlike Canopy Growth Corp, however, Tilray hasn’t really found its footing in 2019.
Underperforming compared to its rivals, Tilray also has the inauspicious title of being the odd man out when it comes to major deals scored in the past few months.
Its Nasdaq companion, Cronos Group Inc (NASDAQ:CRON), has scored big in 2019, as well as the end of 2018 when it closed its Altria Group Inc (NYSE:MO) deal, linking marijuana and “Big Tobacco.”
TLRY stock is by no means doomed, but the company would need to make a major move in order to help drive its value up compared to its more successful competition.
CGC and TLRY Stock Performances
The performances of CGC stock (black line) and TLRY stock (blue line) over the past week are seen on the chart below:
Chart courtesy of StockCharts.com
The writing is as clear as day, it’s on the wall, it’s in blood; any cliche designating inevitability you can think of applies to U.S. marijuana legalization at this point.
We’re going to see marijuana legalized in the U.S., but, as always, the question is when.
With the House shakeup, there’s a genuine chance we may see pot legislation move through the House and into the Senate, where it would face a difficult-but-not-impossible fight.
I don’t predict we’ll see it pass in 2019, but the very fact that we’re even asking the question shows how far we’ve come.
And, as always, marijuana stocks are going to skyrocket when this legislation does eventually pass.