What happened

Several top Canadian cannabis stocks were sinking on Wednesday. Shares of Aurora Cannabis (NASDAQ:ACB) were down 9.9% as of 11:14 a.m. EST. Canopy Growth (NASDAQ:CGC) stock was tumbling 8.7% lower. Cronos Group (NASDAQ:CRON) and Tilray (NASDAQ:TLRY) were falling 9.4% and 9.7%, respectively. Aphria (NASDAQ:APHA) and OrganiGram Holdings (NASDAQ:OGI) also slid to a lesser extent -- 2.4% and 5.2%, respectively.

The culprit behind these declines was the surprising outcome (or, at least, anticipated outcome) of the U.S. elections. Polls leading up to Election Day indicated that Democrats had a very good chance of regaining control of the Senate. At this point, that scenario doesn't seem likely (although some votes remain to be counted). With the GOP in control of the Senate, the possibility of changes to federal laws related to cannabis will almost certainly be much lower than they'd be with Democrats in the majority.

Hand holding cannabis leaf in front of a U.S. flag

Image source: Getty Images.

So what

All of the major Canadian cannabis producers really want to enter the huge U.S. marijuana market. Canopy Growth even struck a deal to acquire U.S.-based Acreage Holdings if marijuana becomes legal at the federal level. Canopy, Aurora, Cronos, and Tilray have already taken steps to enter the U.S. hemp market, but it's the U.S. marijuana market that they're really eager to jump into.

Technically, any of these companies (including Aphria and OrganiGram) could enter the U.S. marijuana market right now. However, they'd have to forfeit their listings on major U.S. stock exchanges. No company can list its shares on the major U.S. exchanges and be in violation of federal laws. Currently, of course, marijuana remains illegal at the federal level in the U.S.

It's probably fair to say that the management teams of all of the top Canadian cannabis producers were rooting for the Democrats to gain control of the Senate and for Joe Biden to win the presidential race. That could have set the stage for medical marijuana legalization throughout the U.S. and for changes to federal laws that would recognize the rights of individual states to enforce their own recreational pot laws. This would have in turn enabled Aurora, Canopy, and the other leading Canadian cannabis producers to expand into the U.S. market without jeopardizing their stock listings on the major U.S. exchanges.

For now, at least, these companies might have to remain focused on the Canadian market, where both medical and recreational cannabis is legal. Several of the companies also have sizable operations in other countries where medical cannabis is legal, especially in Germany.

Now what

Democrats appear to have picked up additional Senate seats in Arizona and Colorado but lost one seat in Alabama. They need to net three pickups if Biden wins (the vice president casts any tie votes in the Senate) or four seats if President Donald Trump is reelected. It could be a few days or even more before the final outcome is known.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.