Weed Stocks Dip Following GOP Legalization Bill Proposal
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Weed Stocks Dip Following GOP Legalization Bill Proposal

Republican-led legalization effort gains traction, leading to a potential increase in the value of cannabis stocks.
Neither the author, Kingsley Alo, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

On Monday, several Republican members of the US Congress formally presented a new bill to legalize and tax marijuana federally. The new legislation is sponsored by Rep. Nancy Mace and five other republican cosponsors. Titled “The States Reform Act”, it is seen as an alternative to the Democratic-led reform proposals for the industry.

The proposed Act intends to regulate cannabis in the same way that alcohol is regulated. If passed, it will also decriminalize cannabis on a federal level by removing it from the Controlled Substances Act.  This proposal comes in the wake of several mergers and takeovers and an increasing number of cannabis dispensaries in the US.

In addition, Senator Warren recently urged POTUS (President of US) to pardon everyone convicted of federal nonviolent cannabis charges.

Cannabis Stocks Respond to the New Plan

US cannabis stocks, which have been in freefall over the last couple of months, witnessed a temporary surge in response to the news, but then returned to their downtrend. This followed a similar pattern seen in June when another regulation was up for consideration.

Monthly price chart for TerrAscend and Green Thumb Stock.
Source: Tradingview. 

Following reports of the proposal’s existence, cannabis stock prices responded negatively to the news, at least in the short term. Leading cannbis firm TerrAscend saw its stock price dip by 1.34% as markets reopened today, while Green Thumb, a cannabis product producer, saw a slide of 3.19%. These prices then spiked and peaked above 25% to reach new yearly highs before losing steam following the formal presentation of the bill.

According to Tim Seymour, an ETF portfolio manager, big industry players like TerrAscend and Trulieve may post impressive earnings due to the increase. He expects cannabis stocks to continue rising as earnings season approaches, legalization prospects heat up, merger and acquisition activities continue, and valuations reset.

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Cannabis’ Regulation History

The US has a storied history with weed that dates back to the colonial era. The US colonies were encouraged to grow hemp in the 17th century to produce ropes, sails, and clothes. The cultivation of cannabis plants also thrived until after the civil war when imports took over.

Following increased marijuana imports from Mexico as more immigrants moved to the US, anti-drug activists warned of the looming “Marijuana Menace.” This followed mass hysteria and fear in the aftermath of the Great Depression. In 1937, Congress passed the Marijuana Tax Act, effectively criminalizing marijuana at the Federal level.

In the 1950s and 60s, a cultural transition resulted in more tolerant attitudes toward marijuana. The early 1970s saw penalties for drug-related offences repealed, with 11 states decriminalizing weed. However, in the late 70s, a parents’ movement against cannabis started, leading to the “war on drugs” in the 80s.

Eventually, the late 20th century saw a significant shift in public attitudes to marijuana. California enacted Proposition 215 in 1996, enabling the sale and use of marijuana for people with AIDS, cancer, and other severe, painful conditions. Since then, there has been a conflict between federal laws criminalizing marijuana and state laws allowing marijuana in certain circumstances.

Given weed’s very recent history, some see the current move by the GOP as a means to win votes in the forthcoming midterm elections. The Democrats, who have a slim majority in Congress, have traditionally been seen as more pro-cannabis than the more conservative Republican Party.

However, fears had arisen over their ability to get Republicans on board with their “End Prohibition and Promote Social Equity Bill”. The Democrats proposed a law that went through the House Judiciary Committee in September. Justin Kanew, a local politician from Tennesse, warned Democrats to not make a mistake in letting the Republicans steal the narrative on the cannabis issue.

If the bill eventually passes, it would have far-reaching implications globally. More countries could follow suit and legalize the use of weed for recreational purposes.

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Do you see legislation in support of cannabis use being passed soon? Let us know in the comments below.