Are Marijuana Stocks About to Skyrocket? Trump Chooses to Back the States Over Sessions

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Though President Trump wrote The Art of the Deal, he might need to take notes from Republican Senator, Cory Gardner. Colorado, Senator Gardner’s home state, has supported legal recreational cannabis since 2012.

In response to Sessions’ removal of Obama-era federal protection for marijuana businesses in the United States, Senator Gardner issued his own ultimatum.

After Attorney General Jeff Sessions rescinded the Cole Memo – which had provided marijuana stocks operating in legalized states a degree of protection from interference by federal law enforcement officials – Senator Gardner issued an ultimatum. His words to Sessions were clear: “I will be putting a hold on every single nomination from the Department of Justice until Attorney General Jeff Sessions lives up to the commitment he made to me in my pre-confirmation meeting with him… Until he lives up to that commitment, I’ll be holding up all nominations of the Department of Justice.”

It appears Gardner’s tactic was successful.

The question for investors looking for marijuana stocks to buy now is whether or not this deal will provide the necessary make a positive impact on marijuana stocks.

Attorney General Sessions’ views on marijuana legislation have created more barriers to marijuana stock growth; however, President Trump recently overrode him in a deal with Senator Gardner.

From the word go, marijuana supporters and businesses have been wary of Trump’s choice of attorney general. Sessions long held negative views of marijuana and opposition of its legalization were well known. His statement, at one point, that “good people don’t smoke marijuana,” understandably did not bode well for marijuana stocks.

When Sessions moved to repeal the marijuana policies set up during Obama’s administration, this came as no big surprise to most people involved in the industry. Among those who were surprised, however, was Senator Gardner. Gardner asserts that, in a meeting with Sessions, he was assured the Trump administration would not view enforcement of federal cannabis laws as a priority.

It seems the tables have turned, though, and Trump has overridden the actions of his attorney general. According to Gardner, the president agreed to leave state laws permitting cannabis use alone in Colorado. Stepping back to view the big picture, Gardner relayed Trump’s pledge of support for “a federalism-based legislative solution to fix this states’ rights issue once and for all.”

In the meantime, Senator Gardner has been hard at work rallying senator members of both the Republican and Democrat parties to promote legislation in order to prevent further interference by the federal government in states with marijuana laws. Together with Senators Rand Paul (R-KY) and Ron Wyden (D-Ore), he is working toward reforming cannabis business tax laws through the co-sponsoring of a bill.

The deal between Trump and Gardner is good news for some marijuana stocks whose shares have soared recently. 

The marijuana stock with the most movement following the announcement of the Trump-Gardner deal was Aphria (NASDAQOTH:APHQF) whose shares have risen almost 15%.

The question is, why would this news from the United States impact a Canadian weed stock so significantly? Among Canada’s major growers, Aphria has been one of the few with significant operations established within the U.S. While the company has reduced its exposure in the states since the Toronto Stock Exchange threatened delisting of index members with business activities underway in the U.S. in violation of federal cannabis laws, it has maintained a presence. Aphria still has a 28.1% stake in Liberty Health Sciences, a company focused on the American cannabis market.

Some Canadian pot stocks have received a boost even without significant business ties in the U.S. After the deal, the shares of Canada’s two largest cannabis growers by market cap also rose: Canopy Growth (NASDAQOTH:TWMJF) by 7% and Aurora Cannabis (NASDAQOTH:ACBFF) by 8%. 

Significant to note was the stock price of U.S.-based company, Scotts Miracle-Gro (NYSE:SMG), barely moved following news of the deal. This company is one of the major suppliers of equipment (i.e., lighting systems, hydroponics) to marijuana growers in the Unites States and, yet, its shares hardly lifted by even 1%. 

Depending on the level of support Trump lends to legislative changes in federal laws regarding marijuana in the U.S., marijuana stocks may be able to catch momentum to sustain themselves in the long-term. 

While reinstating a hands-off policy toward legalized marijuana businesses in the Department of Justice may give the industry a boost, it remains a temporary solution. The possibility of intervention by the federal government needs to be removed in order for cannabis-related businesses in the U.S. to thrive.

That said, were U.S. federal laws to change, allowing for recognition of legalized marijuana on state levels, a more lasting solution could be set in motion. Add to this the lifting of restrictive regulations to which banks are subjected in the provision of services to marijuana businesses and the U.S. marijuana industry could finally explode in growth.

Were these changes to occur on a federal level, a domino effect would likely play out. No doubt Canada’s large marijuana growers – such as Canopy Growth Corp., Aurora Cannabis and Aphria – would expand their focus to include establishing major U.S. operations. Companies based in the U.S. would likely scramble for listings on stock exchanges which would result in a variety of alternatives for marijuana stocks investors who have largely been limited to marijuana stocks in Canada. An equipment supplier, such as Scotts Miracle-Gro, could suddenly find itself in the enviable position of providing necessary resources to fuel the green rush.

As with all news in the investment world, time will tell how things play out, particularly considering the twists and turns involved in the political process. Based on President Trump’s willingness to uphold his part of the deal with Senator Gardner, marijuana stocks in the U.S. may see new rays of hope on the horizon.

(For current news on the Canadian marijuana market, read Why Canadian Stocks Are On Sale.)

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