What happened

Marijuana stocks skyrocketed on Friday as vote counting in several states pointed increasingly toward a victory for Democratic candidate Joe Biden. By close of trading, shares of Cronos Group (NASDAQ:CRON), OrganiGram Holdings (NASDAQ:OGI), and HEXO Corp (NASDAQ:HEXO) were up 16%, 18%, and 24%, respectively. 

So what 

Biden and his running mate Kamala Harris have promised to decriminalize marijuana at the federal level. A notable step toward full-scale legalization, decriminalizing marijuana would likely also make it easier for cannabis companies to operate in the U.S. Many banks have shied away from providing financial services to marijuana-related businesses for fear of running afoul of federal law. Decriminalization might make banks more willing to serve cannabis companies.

A U.S. flag with the stars replaced by a cannabis leaf.

Marijuana stocks rose sharply on Friday as investors grew more optimistic about the potential of the U.S. cannabis industry. Image source: Getty Images.

It's even possible that Biden will take steps toward federally legalizing cannabis, which would certainly be a boon for Cronos Group, HEXO, and OrganiGram. Legal cannabis sales could approach $100 billion in the U.S. within the next decade, according to some analysts. 

Now what

Legalization is also taking place at the state level -- a trend that appears to be accelerating as governments seek to mitigate pandemic-related tax revenue shortfalls. Five states recently approved measures to legalize either medical or recreational marijuana sales, and more are likely to do so in the coming years.  

Cronos Group, HEXO, and OrganiGram all stand to benefit from these developments, and investors bid up their shares in kind.

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.