Cannabis stocks surged on Wednesday following the early results of Georgia’s key Senate runoffs that could open the door to federal cannabis reform.
Shares in Canadian cannabis giants, including Canopy Growth (CGC) and Tilray (TLRY), surged more than 10% while multi-state U.S. operators saw double-digit gains as well led by Green Thumb Industries’ (GTBIF) 8% gain.
With Democratic candidate Raphael Warnock claiming victory in his race against incumbent Sen. Kelly Loeffler (R -GA) and Democratic challenger Jon Ossoff winning his race against GOP Sen. David Perdue, Democrats took control of the Senate. That fuels hopes that prior roadblocks, including refusal on the part of Senate Majority Leader Mitch McConnell to bring cannabis reform bills to the chamber, could be removed to move legalization efforts forward on a national level.
In a new note, Cowen cannabis analyst Vivien Azer said the change of Senate control would catalyze constructive changes for the sector.
“With the Democrats likely taking control of the U.S. Senate, the backdrop for U.S. cannabis is now far more constructive than our base case had assumed,” she wrote. That view was echoed by Piper Sandler analyst Michael Lavery, who added that Democratic control of the Senate, “could help provide better access to capital, alleviate operating headwinds, and help drive industry growth.”
That said, even with control of the Senate, the margin of control would be slim to press for more progressive reforms such as the Vice President-elect Kamala Harris-backed Marijuana Opportunity Reinvestment and Expungement Act (MORE) Act which would decriminalize marijuana at a federal level. Azer estimates more moderate reform could come first, perhaps in the form of a modified Strengthening the Tenth Amendment Through Entrusting States (STATES) Act, which could allow cannabis companies to access traditional banking and financial services and alleviate burdensome federal taxes.
“To the extent that the industry is presented with an opportunity to lobby for either of these measures, we would expect a consensus to form around the STATES Act over the MORE Act,” she said.
The AdvisorShares U.S. multi-state operator focused ETF (MSOS) closed about 6% higher while the Canadian focused Alternative Harvest ETF (MJ) finished the day up about 7%.
Zack Guzman is an anchor for Yahoo Finance Live as well as a senior writer covering entrepreneurship, cannabis, startups, and breaking news at Yahoo Finance. Follow him on Twitter @zGuz.
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