This Week in Cannabis Investing: Booker Shows Support for SAFE Banking Act

Plus, cannabis stock volume peaks after Biden's announcement and marijuana ballot measures could impact industry growth.

Senator Cory Booker shows support for Safe Banking Act
(Image credit: Getty Images)

A flurry of dialogue materialized from the House and Senate in response to President Joe Biden's executive action last week to pardon thousands of federal marijuana convictions. Senator Cory Booker (D-New Jersey) and Senate Majority Leader Chuck Schumer (D-New York) seem to be changing their tone on the SAFE Banking Act. 

Previously, the two Democratic leaders have worked to delay SAFE Banking's progress in favor of adding additional social justice measures to the bill. However, Biden's marijuana announcements have alleviated some of those concerns, and we're pleased to see Booker responding positively. 

"There are already conversations and dialogue going on about some kind of bipartisan movement because we see problems within the banking industry, and a lot of people who are winning licenses can't get access to loans and more," Senator Booker told NPR. "So there's a lot of folks who understand that we have to act on the federal level to do more than the president's done, and I'm hopeful that this Congress, actually in the lame-duck after the midterms, I'm very hopeful we can get something done."

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

Medical marijuana is now legal in 38 states, and recreational cannabis use is legal in 19, as well as the District of Columbia. Five more states will vote on legalizing adult-use next month. And with more red states now voting in favor of loosening cannabis restrictions, all eyes are on the Senate's upcoming actions in the lame-duck session. 

Cannabis Stock Trading Volumes Hits Record High

Not surprisingly, pot stocks surged last week after President Biden asked for a review of marijuana's drug classification. On the day of the announcement, we saw a significant final hour of trading given the very high trading volumes. Cannabis stocks and cannabis-focused exchange-traded funds (ETFs) reached record high volumes the day following Biden's news. 

Among the investment community, discussions are taking place around hosting meetings and events to educate and inform more institutional investors about the implications of the president's actions. 

Some marijuana stocks have begun to give back their gains, but the possibility of federal legalization and the elimination of the 280E tax rule could provide a foundation for U.S. cannabis stocks. Multi-state operator Curaleaf (CURLF), for example, remains up more than 10% from its Oct. 5 close.

During the post-announcement excitement, Cresco Labs (CRLBF) tweeted, "This is huge news – the biggest step under the Biden administration so far on federal cannabis reform." Shares for the Chicago-based operator rose 24.4% during last Thursday's surge. 

Across the border, Canopy Growth (CGC) saw a 36% loss across Friday and Monday, erasing some of Thursday's gains. Canadian cannabis stocks saw a steeper fall possibly due to less compelling fundamentals, correlation with the weak state of the broader market, and current federal progress preventing operators from entering the U.S. for longer. We would not be surprised to see a stronger bid for all cannabis stocks through the elections as investors become increasingly optimistic about federal action during the Senate's lame-duck session.  

Cannabis Ballot Measures to Impact Industry Growth

Five states are preparing for ballot measures during the upcoming midterm elections that could legalize recreational cannabis. Voters in Maryland, Arkansas, Missouri, North Dakota and South Dakota will have their say on Tuesday, Nov. 8. A considerable amount of coverage has been given to President Biden's announcement, which is no surprise given the historical significance, but the addition of more states to the legal cannabis marketplace is also important news for investors.  

Before adding in any new states, annual U.S. legal cannabis sales are projected to grow at a compound annual growth rate of 11% and reach over $57 billion by 2030. According to work done here at Poseidon and using other industry data sources, we believe the addition of these five states to the marketplace could add another $3.8 billion to annual adult-use sales. 

The addition of more states to the recreational market and the potential for adult-use legalization in almost 50% of U.S. states will also influence the view that the President's administration takes on federal cannabis legalization.

Morgan Paxhia
Contributing Writer

Morgan Paxhia is Managing Director and Co-Founder of Poseidon Investment Management. With over 10 years experience in investing and finance, Morgan has developed a deep understanding of individual company analysis, portfolio construction, and risk mitigation. This content is not intended to provide any investment, financial, legal, regulatory, accounting, tax or similar advice, and nothing should be construed as a recommendation by Poseidon Investment Management, LLC, its affiliates, or any third party, to acquire or dispose of any investment or security, or to engage in any investment strategy or transaction. An investment in any strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. This content should not be considered as an offer or solicitation to purchase or sell securities or other services. Any of the securities identified and described herein are for illustrative purposes only.  Their selection was based upon nonperformance-based objective criteria. The content presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Past performance is not indicative of future results.