Will U.S.Legalization Hurt International Cannabis Stocks?

Will U.S.Legalization Hurt International Cannabis Stocks?

Cannabis stocks jumped this week on news that a Republican-led cannabis legalization measure was being circulated in the United States.

The main beneficiary from the favorable news seemed to be U.S. cannabis stocks, however, some international stocks also experienced higher prices after the news surfaced.

Stocks for cannabis companies inside and outside of the United States have suffered in 2021, with many stocks being at historic lows. 

So much so that JPMorgan recently announced restrictions on trading in some U.S. cannabis stocks. With that in mind, the spike in prices was obviously welcomed.

Continued Stock Discrimination

For those that haven’t been following along, cannabis stocks operate in the United States in a weird manner.

Most U.S.-based cannabis stocks are prohibited from trading on major U.S. stock exchanges, while Canadian-based stocks are allowed.

That creates a potential situation in which the rise of access to major stock exchanges for U.S. cannabis companies could have a direct impact on Canadian cannabis stocks.

It’s unclear whether or not the current legislation that is being passed around in Washington D.C. will ultimately become law, however, it’s likely a safe bet that when cannabis legalization does eventually pass in the U.S. it’s going to have a ripple effect on the international industry.

People that were heavily invested in international stocks could transition to U.S.-based stocks, and U.S. companies will then have more capital to expand their operations and compete with international companies in ways that haven’t been possible to date.

When Will the United States Legalize?

Anyone that claims to know exactly when the United States will legalize cannabis is likely trying to sell you something because no one knows for sure.

It makes no sense why cannabis is still prohibited at the federal level in the United States for a number of reasons, not the least of which is public support for such a policy change.

Gallup polling has conducted a legalization survey every year since 1969. Back then, only 12 percent of U.S. voters supported legalization.

The annual survey results were recently released, and support is standing firm at 68 percent. Clearly, legalization is popular in the U.S.

Unfortunately, as history has shown, support for legalization in Congress is much lower because year after year legalization fails to pass. The President can also legalize via executive action, albeit via a much more cumbersome process, but regardless, the same lack of action occurs.

Legalization will happen at the federal level in the U.S. eventually, it just may take longer than people expect. In the meantime, international cannabis stocks will continue to enjoy less competition on major U.S. exchanges.



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