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If Any of These Legislative Efforts Get Traction, It Could Be Huge for Marijuana Stocks

By Keith Speights - Apr 23, 2017 at 9:03AM

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There's a lot of activity in the U.S. Congress to ease restrictions on marijuana. Could these efforts pay off for marijuana stocks?

It remains to be seen what Attorney General Jeff Sessions will or won't do with regard to enforcing federal marijuana laws in states that have legalized the drug. However, several efforts are quietly under way to change those laws.

At least a dozen bills have been introduced in the U.S. Congress over the past three months that relate to marijuana. Several of them could have significant ramifications for marijuana stocks if they are ultimately passed. Here are three that could have especially big impacts.

Marijuana buds with gavel

Image source: Getty Images.

Make up the gap

Sen. Ron Wyden and Rep. Earl Blumenauer, both Democrats from Oregon, simultaneously introduced the "Responsibly Addressing the Marijuana Policy Gap Act" to the U.S. Senate and House of Representatives on March 30. The act would change federal law in several ways to allow state laws on marijuana to take precedence.

The bicameral legislation would eliminate criminal penalties for individuals who violate the federal Controlled Substances Act but comply with state laws. It would allow federal tax deductions and credits in connection with sales of marijuana that are compliant with state laws. The act would also limit restrictions on marijuana advertising in states that have legalized marijuana. Another important component of the bill is to remove penalties and restrictions for banks and financial institutions to provide services to marijuana-related businesses. 

So far, the proposed legislation has only been introduced in the Senate. The bill has been referred to several House committees for review, however, including the Judiciary, Energy and Commerce, and Ways and Means committees. 

Show Uncle Sam the money

Sen. Wyden and Rep. Blumenauer introduced an even more sweeping legislation to their respective chambers on March 30. This bill, referred to as the "Marijuana Revenue and Regulation Act," would radically change current federal laws pertaining to marijuana.

The act would totally decriminalize the use and sale of marijuana at the federal level. While that might not appeal to some in Congress, another part might: the establishment of new federal taxes on marijuana. Oversight of marijuana would also be handled by the same federal agencies that address alcohol, including a renaming of the Bureau of Alcohol, Tobacco, Firearms, and Explosives to the Bureau of Alcohol, Tobacco, Marijuana, Firearms, and Explosives. 

Nothing has been done yet in the Senate on the proposed legislation since Sen. Wyden introduced it. In the House, the bill has been referred to the Ways and Means committee for review.

A better schedule

A less ambitious piece of legislation has attracted bipartisan support. Rep. Matt Gaetz (R) and Rep. Darren Soto (D), both of Florida, introduced H.R. 2020 to the House of Representatives on April 6.

The bill doesn't have a catchy title yet, but its intent is to reclassify marijuana from a Schedule 1 drug under the Controlled Substances Act to a Schedule 3 drug. Schedule 1 drugs by definition have "no currently accepted medical use and a high potential for abuse." Schedule 3 drugs, on the other hand, have "a moderate to low potential for physical and psychological dependence."

Two House committees now have responsibility for reviewing the proposed legislation -- the Judiciary committee and the Energy and Commerce committee. 

U.S. Capitol building

Image source: Getty Images.

Odds and ends

What are the odds that any of these bills will pass? And what would the end results be for marijuana stocks if they did?

A somewhat similar version to one of the bills has already died in committee before. In 2015, Blumenauer introduced a bill to tax marijuana, like the proposed Marijuana Revenue and Regulation Act. That earlier version, however, never made it out of the House Ways and Means committee. 

It's probably unlikely that the latest version will pass Congress, either. There could be some support for bicameral legislation to give precedence to state laws pertaining to marijuana, however.

The act to reschedule marijuana might gain the most support, especially with studies like those conducted by GW Pharmaceuticals (GWPH) that show evidence for medical efficacy of cannabidiol in treating certain conditions. Even though the U.S. Drug Enforcement Agency declined to reschedule marijuana last year, senators and congressional representatives tend to be more easily swayed by public opinion. The majority of Americans now support legalization of marijuana. Even still, passage of the rescheduling bill is definitely an uphill battle.

GW Pharmaceuticals is already following the regulatory approval process established by the U.S. Food and Drug Administration. However, conducting clinical studies in the U.S. would probably be easier for the company if any of the proposed bills became law. Other marijuana stocks could be helped even more.

One of the biggest beneficiaries would be Medical Marijuana, Inc. (MJNA -0.76%). If either of the bills introduced by Wyden and Blumenauer passed, the company would have clear sailing to market its products in the growing list of states that have legalized medical marijuana and/or recreational marijuana. 

Medical Marijuana wouldn't be affected quite as much by the bill calling for rescheduling of marijuana. However, it could help the company and other medical-marijuana dispensaries openly work with banks, an obstacle that's been a significant issue for marijuana-related businesses.

For now, though, investors shouldn't hold their breath that any of these legislative acts will pass. And that means marijuana stocks such as Medical Marijuana could continue to be quite volatile.  

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