Cannabis stocks are once again on the move today, with some big names being seen across the sector. Shares of Canopy Growth (NASDAQ:CGC), Tilray (NASDAQ:TLRY), Aurora Cannabis (NASDAQ:ACB), AdvisorShares Pure US Cannabis ETF (NYSEARCA:MSOS), and Cronos (NASDAQ:CRON) are all up between 2% and 10% in today’s session, with Canopy Growth leading the way higher.
This move in these top cannabis names is tied to reports that the Department of Justice (DOJ) is formally moving to reclassify cannabis as a less dangerous drug. There’s been rumors on this front for some time. But hearing it from the horse’s mouth is what many investors clearly wanted to see.
The proposed rule change would have the DOJ recognize the medical benefits of cannabis and note that it has less potential for abuse than other drugs. A Drug Enforcement Administration (DEA) public comment period is expected, but this is certainly a historic shift that’s taken generations to finally take hold.
Let’s dive into this news and what it may mean for the cannabis sector overall.
Cannabis Stocks Surge on Proposed Marijuana Reclassification
Pretty much the entire thesis around cannabis stocks, in general, has centered around the idea that countries around the world will continue to reclassify and legalize marijuana over time. Of course, the “war on drugs” is still embedded in the minds of many. It wasn’t that long ago that cannabis was viewed as the gateway drug to a much darker road.
However, today, the mood has clearly shifted both among the voting public and regulators. This reclassification is a strong initial step toward legalization in the U.S. Now, whether the Biden administration pursues any legalization efforts during the rest of this term remains to be seen (and I think it is unlikely). But if Biden wins again, many believe that cannabis legalization could be on the docket sometime in the next four years.
We’ll have to see how this all shapes up, but it would dramatically change the outlooks for these companies. Currently, multi-state operators and companies based in Canada (where cannabis is fully legalized) are only able to sell recreational cannabis in certain states, with specific restrictions. However, moving to a more open model should free up capital to be invested in this sector, which could have a big impact on the shares of these companies.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
