Marijuana Stocks Rebound as Trudeau Government Looks to Expedite Legalization
Marijuana stocks outpaced the broader market on Tuesday, as the Canadian government took a rare step to expedite the legalization of recreational cannabis later this year.
Pot Sector Rises
The North American Marijuana Index rose 11% to $289.21, more than offsetting Monday’s sharp drop. The index is down 9% over the past five sessions as Wall Street suffered its worst declines in over six years.
Most of the gains occurred north of the border, with the Canadian pot stocks adding more than 14%. The Canadian Marijuana Index has 24 constituents and a market cap of $25 billion.
Canada on Target for Legalization
On Tuesday Canadian Prime Minister Justin Trudeau took decisive measures in expediting the passage of legislation that would open up the nation to recreational marijuana. The head of the Liberal government has appointed four cabinet members to the nation’s Senate in an effort to push the legalization bill forward.
Although the senators haven’t committed to passing legislation quickly, their appointment suggests Trudeau is seeking to remove obstacles to legalization by July 1. That’s the day Canada is set to become the first Group of Seven country to legalize recreational cannabis.
“We are confident that we are on track” to legalization, said Justic Minister Jody Wilson-Raybould, as quoted by Bloomberg. “I am confident that we will be in a place for the legalization of cannabis, July of 2018, and that a responsible process for implementation of the act will continue thereafter.”
Huge Market Potential
Investors, businesses and consumers are excited about what legalization will bring to the economy, with various estimates calling for a multi-billion-dollar market in the not-too-distant future. Deloitte says Canada’s pot economy is worth up to $8.7 billion. When factoring ancillary services and other multipliers, the total market could be worth as much as $22.6 billion.
Legalization is also catching wind south of the border, where nine states and D.C. have passed laws permitting recreational use. What’s more, support for the drug rose to all-time highs in 2017, with a Gallup poll showing nearly two-thirds of Americans in favor of legalization.
However, legalization faces more obstacles in the United States than in Canada. Last year, U.S. Attorney General Jeff Sessions reversed Obama-era guidance on marijuana laws, signaling a renewed crackdown on the drug. The policy shift maintains the federal government’s enforcement of prohibition despite broad legalization across several states. Several pro-marijuana states have already signaled their discontent, setting the stage for a debate that extends far beyond marijuana and into state rights.
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