What happened

Shares of Aurora Cannabis (ACB 3.26%), Canopy Growth (CGC 0.77%), and a host of other cannabis stocks moved sharply higher on Thursday, following comments by Democratic vice presidential candidate Sen. Kamala Harris and Republican Gov. Phil Scott of Vermont. By the close of trading, Aurora and Canopy's stocks were up 10.6% and 13.6%, respectively.

So what

Sen. Harris said during the vice presidential debate on Wednesday that if elected, former vice president Joe Biden would decriminalize marijuana. That same day, Gov. Scott announced that he would allow the legalization of marijuana to move forward in his state. 

A U.S. flag with a cannabis leaf in the place of the stars.

Cannabis stocks caught fire on Thursday as investors grew more hopeful that legalization in the U.S. could come sooner than expected. Image source: Getty Images.

Harris's comments and Vermont's move to legalize weed highlight an increasingly favorable outlook toward cannabis among lawmakers. That bodes well for a marijuana industry that's been beset by a host of challenges in recent years.

Now what

Aurora and Canopy have seen their stock prices sink over the past year. Regulatory delays, slower-than-expected retail store openings, and a persistently strong black market have all weighed on the cannabis industry's growth. Aurora, once a shining star, was hit particularly hard as it struggled with production overcapacity, acquisition-related writedowns, and dwindling cash reserves. 

However, progress toward legalization at the state and federal level in the U.S. is seen as a huge potential growth driver for the industry. Canopy has taken steps to position itself to move quickly should the U.S. federal government legalize marijuana, and the company could deliver handsome gains to investors if that were to occur in the next few years. Aurora is in a more difficult position due to its cash crunch, but legalization could be the lifeline it needs to get its business back on solid ground.