(TMU) — Cannabis industry shares are soaring after a key U.S. congressional committee overwhelmingly approved a bill that would comprehensively end the federal prohibition of cannabis, clearing the way for a full floor vote in the Democratic-controlled House of Representatives.
On Wednesday, the House Judiciary Committee passed HR 3884—the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act by a 24-10 vote.
As a result, Reuters reports that marijuana companies including Canopy Growth, Aurora Cannabis, Aphria Inc., and Tilray Inc. have climbed in value by anywhere between 8% and 15%.
Garrett Nelson, a senior equity analyst at CFRA Research, told the news agency:
“We think federal legalization would be a big positive for investor sentiment surrounding cannabis equities, which have been battered by oversupply and a steep price decline for the underlying commodity since becoming legal in Canada.”
The MORE Act was introduced by Chairman Jerrold Nadler (D-NY) and enjoys over 50 co-sponsors. If approved, the landmark bill, would see the removal of cannabis from the Controlled Substances Act, ending prohibition on a national level and enable states to move forward with their own policies regulating the commerce and consumption of the plant.
The removal of cannabis from the Controlled Substances Act as a Schedule I narcotic would mean that the plant would no longer be defined by the Drug Enforcement Administration (DEA) as a drug “with no currently accepted medical use and a high potential for abuse” in league with LSD and heroin.
States would also be incentivized to expunge the criminal records of low-level cannabis offenders, removing a barrier that bars access to voting, employment, professional licenses, housing, and even the ability to adopt a child. Federal marijuana conviction and arrest records would also be expunged.
The bill will also authorize a 5 percent federal sales tax on cannabis products manufactured in the U.S. or imported.
Despite the continued prohibition of marijuana on a federal level, 33 states and the District of Columbia have legalized it for medical purposes while 11 states have legalized cannabis for recreational use.
The subject of decriminalization and legalization on a federal level also remains a hot topic in U.S. politics, including as a subject of heated debate during the fifth Democratic presidential debate on Wednesday.
Analysts are wary about the future of the bill, as are some sponsors of the bill. Alan Brochstein, a managing partner at New Cannabis Ventures, told Reuters:
“It’s such an early step in a long process that there are no near-term implications for cannabis stocks. The Senate isn’t likely to approve it, even if the House were to do so.”
Jason Wilson, an analyst at cannabis stock-tracker ETFMG Alternative Harvest ETF, told Market Watch:
“The vote was mostly symbolic and is just the first step toward full legalization.
But legalization will come eventually and there’s still a lot of money on sidelines looking to get into the space.”
Shares in the cannabis industry have faced tough times this year as retail stores roll out slowly in Canada while supplies remain overly high in relation to demand. Uncertainty related to U.S. regulations and the continued thriving of the cannabis black market has also dealt a blow to the legal cannabis market, making investors queasy about involvement in the sector.
However, cannabis investors are hopeful that good times are ahead as the MORE Act continues to move forward in the U.S. legislature, albeit toward an unpredictable future.
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