What happened

Shares of several top Canadian cannabis producers were rebounding today after significant drops on Wednesday. Aurora Cannabis (NYSE:ACB) stock was up 12% as of 9:47 a.m. EST. Shares of Tilray (NASDAQ:TLRY) were soaring 12.7%. Canopy Growth (NASDAQ:CGC) was up 3.7% after rising as much as 7.6%. Today's gains stemmed from the same reason that led to Wednesday's drops: the U.S. election outcomes.

However, there's a twist today. It looks increasingly more likely that former Vice President Joe Biden will win the presidential race. Also, Democrats could still have a shot at winning 50 votes in the U.S. Senate, which would effectively give them control in the chamber if Biden wins, since his running mate, Sen. Kamala Harris, would cast any tie-breaking votes if she becomes vice president.

So what

Canadian cannabis producers desperately seek to enter the lucrative U.S. cannabis market. They're prohibited from doing so and keeping their shares listed on major U.S. stock exchanges, though, because marijuana remains illegal at the federal level in the U.S.

Cannabis leaf on a stack of $100 bills

Image source: Getty Images.

Sure, several of the biggest Canadian players compete in the U.S. hemp market. Aurora acquired U.S.-based hemp CBD company Reliva earlier this year. Canopy established hemp operations in the U.S. soon after the 2018 Farm Bill made hemp legal. Tilray acquired hemp foods producer Manitoba Harvest in early 2019. However, the U.S. marijuana market remained off-limits.

Many cannabis investors expected the Democrats to win a majority in the U.S. Senate and hold on to their majority in the House of Representatives in the 2020 elections. A Democratic-controlled Congress would have been much more likely to pass marijuana-reform legislation that has been blocked in the past by the GOP-controlled Senate. With a Democrat in the White House along with Democratic majorities in both houses, the potential for U.S. marijuana legalization, even if only for medical marijuana, was viewed as much higher.

To be sure, the vote count is still underway. However, Biden is currently leading in the popular vote and in the projected Electoral College vote. He also appears to be winning in enough uncalled battleground states to secure the Electoral College votes needed to win the presidency. Democrats are also in a solid position to retain a majority in the House of Representatives.

The outcome of the Senate races is less certain. As it stands right now, the GOP appears to be on track to have 50 seats in the Senate. Control of the Senate could hinge on which candidate wins a January runoff for one of two Senate seats in Georgia.

Now what

The bottom line is that the U.S. elections really aren't completely over yet. Until winners are declared in the several key Senate races and in the presidential race, the prospects for Aurora, Canopy, and Tilray will be in doubt. Look for increased volatility for most Canadian marijuana stocks in the meantime.