US Election Could Renew Push For Federal Cannabis Legalization

It’s been another tough year for cannabis investors in 2020. The ETF MANAGERS TR/TIERRA XP LATIN AME MJ is down 25.6% year-to-date, but the November US elections could have a huge impact on where cannabis stocks are headed in 2021 and beyond.

COVID-19 Disruption: On Wednesday, DataTrek Research co-founder Jessica Rabe said the COVID-19 pandemic has created a distraction for states looking to legalize cannabis, but tax revenue shortcomings have also applied financial pressure on politicians.

Rabe said state legislatures in states such as New York, New Jersey, Connecticut and Pennsylvania have been pushing to legalize recreational cannabis use in recent years. However, putting together the regulatory and tax framework for doing so is a complicated process, and states like New York have had to shift focus to the pandemic in 2020.

In addition, organizations collecting signatures for ballot initiatives have had to shut down efforts due to social distancing rules, delaying some cannabis votes until at least 2022.

Applying Pressure: But even with all the COVID-19 disruption, New Jersey, Arizona, South Dakota and Montana are all voting to legalize recreational cannabis use in November. If the measures pass in New Jersey and Arizona, Rabe said at least a third of the total US population would live in states with legalized recreational marijuana.

“Retail marijuana legalization in a state like New Jersey would put greater pressure on legislatures of nearby states (i.e. New York, Connecticut, Pennsylvania) to garner enough votes to legalize adult-use sales,” Rabe said.

For example, Colorado generated $302.5 million in marijuana tax revenue in 2019. Job creation could be another potential benefit of legalization.

Rabe said investors shouldn’t overlook the pressure that further state legalizations would place on the federal government to lift the nationwide ban on marijuana, particularly if Democrats score a clean sweet in November.

“Should Democrats win the White House and Senate this fall, a Democrat-controlled Congress could put pressure on Joe Biden to deschedule the drug despite his personal qualms,” Rabe said.

Benzinga’s Take: American Marijuana estimates the US is losing $53.2 billion per year by not legalizing marijuana. State-by-state legalizations are always good news for Canadian legal producers and US multi-state cannabis operators, but US federal legalization would open the floodgates for cannabis stocks.

Related Links:
Cantor Fitzgerald Raises Curaleaf Target: 'Prime Way To Play' US Cannabis Legalization
Cantor Fitzgerald Raises Aphria Target: 'Our Top Pick Among Canadian LPs'