Marijuana plants grow at a Canopy Growth facility in Ontario, Canada.
Chris Roussakis/Bloomberg
Cannabis stocks rose Friday after the House of Representatives said next week it would consider a bill to decriminalize marijuana.
Weed stocks spiked on Thursday following news of next week’s potential vote, and were mostly extending the rally on Friday.
Tilray Brands (ticker: TLRY ) stock was up 14%, while Sundial Growers ( SNDL ) gained 4%, Canopy Growth ( CGC) 5%, Aurora Cannabis ( ACB) 6%, and Cronos Group (CRON) 3%.
The House bill, called the Marijuana Opportunity Reinvestment and Expungement Act, or MORE Act, would remove marijuana from the list of scheduled substances. It would also seek to establish a process to expunge prior cannabis convictions.
The House Committee on Rules is scheduled to hold a hearing on the bill on Monday, with a House vote likely to follow later in the week.
A similar bill passed in 2020, but stalled in the then-Republican controlled Senate. Analysts believe this bill could suffer a similar fate.
“We expect the MORE Act to clear the House once again, but we view it primarily as a messaging bill as it has no viable path to passage through the Senate,” wrote BTIG strategist Isaac Boltansky in a research note.
Boltansky believes Congress will ultimately fail to pass comprehensive marijuana reform, but that failure could push lawmakers to clear legislation that could, at the very least, open up the cannabis’ industry access to banking. Although cannabis sales currently are licensed in over 30 states, U.S. banks are essentially barred from providing services to any cannabis-related businesses, from dispensaries to distributors.
The Secure and Fair Enforcement Banking Act, or SAFE Act, is currently winding its way through Congress. If approved, it would prohibit federal banking regulators from penalizing banks that work with cannabis businesses legalized by states. In Boltansky’s view, if the MORE Act fails, SAFE will be a “logical legislative fallback,” and legislation could pass in the second half of 2022. That legislation could include a handful of additional cannabis measures, such as funding for cannabis research, he added.
Cantor Fitzgerald analyst Pablo Zuanic agrees, suggesting that leading Senate Democrats could likely not afford to come out empty-handed on pot legislation after bringing so much attention to their reform proposals. The analyst estimates that in its current version, SAFE could garner a little over 60 votes in the Senate.
“SAFE could be more than just “face-saving”; SAFE passage could be an honorable start, and provide a realistic spark for future broader more comprehensive reform,” Zuanic wrote in a research note on Friday.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
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