New Jersey appeared to be on the verge of making recreational marijuana legal. A vote was scheduled in the state's legislature for Monday, March 25, to legalize recreational pot for adults ages 21 and over. Governor Phil Murphy supported legalization in his 2016 campaign. He even included additional taxes from recreational marijuana sales in his proposed budget for this fiscal year.
But Monday came and went with no vote. New Jersey Senate leaders delayed the vote on legalizing recreational marijuana. What happened? And which marijuana stocks are most impacted by the postponement?
The vote to legalize recreational pot didn't occur on Monday simply because there weren't enough votes for the proposed legislation to pass. New Jersey's General Assembly, the state's lower house, had the 41 votes needed for passage. However, it was a different story in the state Senate.
Senate President Stephen Sweeney (D-Gloucester) delayed the vote after determining that the necessary 21 votes for passing the recreational marijuana legalization bill simply weren't there. Sweeney and his fellow Democrats were apparently three or four votes short of what they needed.
The legislation was opposed by some Democrats and Republicans in the New Jersey Senate who had concerns about the impact that legalizing recreational pot could have on public safety. However, recent polls have indicated that a majority of New Jersey residents support the legalization of recreational marijuana.
Two other related measures were also delayed along with the legislation to legalize recreational marijuana. Gov. Murphy and Democrat leaders in the state legislature had hoped to expand New Jersey's medical marijuana program and expunge criminal convictions related to marijuana possession and minor distribution offenses for as many as 200,000 individuals.
Stocks feeling the most pain
As you might expect, several marijuana stocks with operations in New Jersey felt the sting of the delayed vote on legalizing recreational pot. Most of these stocks with New Jersey connections have flown under the radar for many investors, though.
Shares of Curaleaf Holdings (NASDAQOTH:CURLF) sank 5% on Monday. Curaleaf operates only one dispensary in New Jersey, however. Some of the stock's pullback could have been related to profit-taking after Curaleaf soared last week on news that giant pharmacy retailer CVS Health was selling its hemp-based cannabidiol (CBD) products.
Green Thumb Industries (NASDAQOTH:GTBIF) stock fell close to 5% after the delayed vote in New Jersey. The Illinois-based cannabis company doesn't have operations in New Jersey yet but plans to open a cultivation center and retail store in Paterson, New Jersey, in the near future.
MariMed (NASDAQOTH:MRMD) stock also fell nearly 3% on Monday. The company doesn't operate facilities in New Jersey. However, in October MariMed acquired New Jersey-based cannabis consulting company BSC Group. MariMed indicated at the time that New Jersey was "one of the markets being eyed" for further expansion because of the potential for the state to legalize recreational pot.
Shares of Canadian marijuana grower Terrascend (NASDAQOTH:TRSSF) slipped more than 2% on Monday. In December, the company won a permit to apply for a vertically integrated license including cultivation, processing, and retail operations in New Jersey.
One stock with direct ties to New Jersey didn't decline following the delayed legalization vote. Acreage Holdings (NASDAQOTH:ACRGF) operates one dispensary in New Jersey. Its shares were up nearly 3% on Monday.
A temporary setback
Any issues for marijuana stocks with current or planned operations in New Jersey should only be temporary. New Jersey Senate President Sweeney stated that "marijuana will get passed in the state of New Jersey one way or another."
It's possible that the vote on legalizing recreational pot could be scheduled for as soon as May. Although Sweeney indicated in the past that he'd wait until after the November 2019 elections to hold another vote if the legalization bill didn't pass this month, he stated on Monday that another vote will be scheduled as soon as the needed 21 votes in the New Jersey Senate were lined up.
There's also a Plan B if enough state senators don't commit to supporting the legalization of recreational pot. State legislators could move ahead with placing the issue before New Jersey voters as a ballot referendum in 2020.
The odds appear to be pretty good that New Jersey will present a major new market for plenty of marijuana companies -- and a catalyst for their stocks -- in the not-too-distant future.