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Why is Cannabis Legalization News Spurring the Stock Market?

Why is Cannabis Legalization News Spurring the Stock Market?

February 05, 2021

The stock market isn’t necessarily top of mind here at But some recent happenings made us take notice of the publicly traded securities market…

Earlier this week, three United States senators announced they will “push hard to end the ‘outlaw’ of cannabis and begin the legalization process at the federal level,” according to stock the investment news website, the Motley Fool.

Cory Booker (D-New Jersey), Ron Wyden (D-Oregon), and Chuck Schumer, the Senate Majority Leader, collectively stated: "the War on Drugs has been a war on people -- particularly people of color."

Legalization Rhetoric is Fueling a Cannabis Investment Surge

This announcement comes on the heels of two major political shifts...

First, the MORE Act (which ultimately legalizes cannabis at the federal level) passing the House of Representatives at the end of 2020.

And secondly, the Democrats have taken control of the White House, the House of Representatives, and the Senate.

All of which points to the legalization of cannabis at the federal level being very much within reach.

But while the esteemed Senators' statements framed the push toward federal cannabis legalization as a “social justice issue,” the stock market had a different take...

Shares of four major publicly traded cannabis stocks surged following the announcement in Washington:

  • Canopy Growth (NASDAQ:CGC) – up 5.5%
  • Aurora Cannabis (NYSE:ACB) – up 10.1%
  • Cronos (NASDAQ:CRON) – up 10.9%
  • Clever Leaves Holdings (NASDAQ: CLVR) – up a whopping 18.6%

The senators' overall aim is to: "Push to pass this year sweeping legislation that would end the federal prohibition on marijuana," and confirmed plans to present: "a unified discussion draft on comprehensive reform [of cannabis laws]” in early 2021.

Why Does This Matter to Cannabis Investors?

The majority of US states have legalized (or at least decriminalized) cannabis in one form or another. However, cannabis remains illegal at the federal level. And as a result, the cannabis industry is barred from participating in the banking world.

Banks are federally regulated. And bank deposits and loans are federally (FDIC) insured. Thus, banks are prohibited from accepting deposits from, processing credit card payments for, or making loans to any “illegal enterprise.” And this is how the federal government views cannabis businesses. Which in turn, makes most stock market investors very wary of cannabis stocks.

Of course, federal legalization tosses all such restrictions out the window. And when the banking prohibition ends, the cannabis industry is expected to EXPLODE.

Which means cannabis stocks are poised to become the next hot commodity!

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