What happened
Shares of Charlotte's Web Holdings (CWBHF -3.23%) jumped 10.8% higher on Wednesday. The hemp CBD pioneer didn't announce any news, but the stock appeared to be swept up in an overall rally for cannabis stocks today after the U.S. House of Representatives Judiciary Committee voted to approve a bill that legalizes marijuana in the U.S.
So what
While investors bid up Charlotte's Web shares today, there's actually little reason to get excited about the Judiciary Committee's action. The proposed bill to legalize marijuana passed in the committee in a lopsided 24-10 vote and will likely be able to pass in the full House as well. But the odds of even coming before the U.S. Senate for a vote aren't that great as long as Senate Majority Leader Mitch McConnell (R.-Ky.) remains opposed to marijuana legalization.
Image source: Getty Images.
More importantly, Charlotte's Web's CBD products are made from hemp, a form of cannabis with no more than 0.3% THC -- the main psychoactive chemical in cannabis. Hemp became legal in the U.S. in December 2018. The bill that just passed in the House Judiciary Committee doesn't really impact Charlotte's Web.
Now what
With the bill to legalize marijuana sailing through the House Judiciary Committee, expect it to come before the full House of Representatives for a vote in the near future. Charlotte's Web stock could move higher as the legislation moves forward, even though there would be minimal impact on the company's current business if the bill becomes the law of the land.
The more important political body for investors to watch that will impact Charlotte's Web is the Food and Drug Administration (FDA). If the FDA establishes regulations that clear the way for ingestible CBD products to be sold without any controversy, Charlotte's Web stock will almost certainly skyrocket.
