Why Curaleaf and Green Thumb Stocks Flopped Today

© Provided by The Motley Fool Why Curaleaf and Green Thumb Stocks Flopped Today

What happened

In a development that was all too common throughout 2022, numerous marijuana stocks suffered share price declines on Wednesday. Two U.S. multi-state operators (MSOs) with sizable product portfolios were affected by this, namely Curaleaf (OTC: CURLF) and Green Thumb Industries (OTC: GTBIF), which slipped a respective 4.9% and 7.2%. The sell-off was due in no small part to recent news from the Food and Drug Administration (FDA).

So what

The FDA is currently investigating whether legal marijuana is safe as an ingredient in dietary supplements and food. In the coming months, this research will inform the agency’s recommendations on how to regulate such products in the U.S.

That might not be good news for producers and sellers of cannabis-infused gummies and soft drinks, such as Curaleaf and Green Thumb, however. FDA principal deputy commissioner Janet Woodcock was quoted in The Wall Street Journal as saying, “Given what we know about the safety of CBD so far, it raises concerns for FDA about whether these existing regulatory pathways for food and dietary supplements are appropriate for this substance.”

In other words, her agency could end up recommending stricter regulations on these types of products, which would put a crimp in the business of many weed-derivative producers and retailers.

Now what

Although marijuana stock investors are used to setbacks, tighter regulation on a key segment of the market is a challenge no one needs at the moment. Pot companies are already facing numerous roadblocks to success, including lack of access to basic financial services, persistent black-market competition, and patchy, haphazard legalization.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Green Thumb Industries. The Motley Fool has a disclosure policy.