Republican-Led Attempt To Legalize Cannabis Could Reignite Pot Stocks

Cannabis stocks could become hot again on Wall Street Bets after Marijuana Moment reported Friday a new Republican-led congressional marijuana legalization bill is “imminent.” 

The text of the draft legislation, obtained by Marijuana Moment, specifies Rep. Nancy Mace (R-SC) leads the attempt to legalize pot. The measure, titled States Reform Act, is being examined by stakeholders for feedback and is subject to change before its official filing later this month. 

This is yet another development in what’s proved to be an active year cannabis reform on Capitol Hill. But the GOP angle is notable, as many have raised doubts about the prospects of Congress passing the far-reaching, large-scale marijuana bills that Democrats are leading in the House and Senate. Getting Republican buy in could prove critical to getting something over the finish line, and the Mace measure seems aimed at appealing to the states’ rights and business interests of conservative colleagues on her side of the aisle while also incorporating some restorative justice and tax elements largely favored by progressives.

The freshman congresswoman, who was the sole GOP vote in favor of a cannabis research bill for veterans during a committee markup on Thursday, aims to deschedule marijuana and create a regulatory scheme federally—but still ensure that existing state markets are not unduly burdened or undermined by new rules. – Marijuana Moment

The cannabis news website published a breakdown of the draft legislation and summary documents: 

–Cannabis would be federally descheduled and treated in a manner similar to alcohol.

-A 3.75 percent excise tax would be imposed on cannabis sales. Revenue would support grant programs for community reentry, law enforcement and Small Business Administration (SBA) aid for newly licensed businesses.

-The Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) would be the chief regulator for marijuana with respect to interstate commerce.

-The Food and Drug Administration (FDA) would be limited in its regulatory authority, with the intent being that it would have no more control over cannabis than it does for alcohol except when it comes to medical cannabis. The agency could prescribe serving sizes, certify designated state medical cannabis products and approve and regulate pharmaceuticals derived from marijuana, but could not ban the use of cannabis or its derivates in non-drug applications, like in designated state medical cannabis products, dietary supplements, foods, beverages, non-drug topicals or cosmetics.

–Raw cannabis would be considered an agricultural commodity regulated by the U.S. Department of Agriculture (USDA).

-The legislation would grandfather existing state-licensed cannabis operators into the federal scheme to ensure continued patient access and incentivize participation in the legal market.

-As federal agencies work to promulgate rules, there would be safe harbor provisions to protect patients and marijuana businesses acting in compliance with existing state laws.

–People with certain federal cannabis convictions that were non-violent would be eligible for expungements.

-To prevent youth use, there would be a mandatory 21 age limit for recreational cannabis, and the bill also prescribes certain restrictions on things like advertising.

–SBA would need to treat marijuana businesses the same as other regulated markets, like it does for alcohol companies, for example.

-The measure also stipulates that veterans can’t face discrimination in federal hiring due to cannabis use, and doctors with the U.S. Department of Veterans Affairs (VA) would be specifically authorized to issue recommendations for medical cannabis for veterans.

-Federal agencies could continue to drug test for marijuana.

-The Bureau of Labor Statistics (BLS) would be required to issue a report to Congress on the marijuana industry.

Bloomberg quoted the U.S. Cannabis Council who said it welcomes the “growing bipartisan effort in Congress to end federal cannabis prohibition” and is reviewing the legislative text. 

“It is encouraging to see more Republicans embracing cannabis legalization and putting forward comprehensive frameworks for reform,” U.S. Cannabis Council CEO Steve Hawkins said. 

News of the bipartisan efforts to legalize marijuana may have sparked some positive sentiment among the WSB crowd on Friday. There’s a notable positive sentiment spike in positive conversations surrounding ETFMG Alternative Harvest ETF (MJ).

But there is a caveat for WSB or other investors piling into MJ – that is, the ETF, which holds notable pot companies such as GrowGeneration Corp, Tilray Inc, and Canopy Growth Corp, has seen its outstanding shares balloon 5x since mid-2018 as shares were more than halved.  

So the point is, if new legalization is filed in the near term, WSB will be all over pot stocks, and our warning is, MJ’s issuance of shares could be a hindrance to sustaining an uptrend.