What happened

Nearly every major pot stock closed sharply higher on Monday. Tilray (TLRY), its partner-to-be Aphria (APHA), Aurora Cannabis (ACB 3.26%), HEXO (HEXO), and OrganiGram Holdings (OGI 1.11%) all rose at double-digit rates.

Little guy OrganiGram led the way with a 41% increase; the others followed with respective 17%, 14%, 16%, and 11% gains on the day.

Illegal and Legal spelled out in dice next to marijuana leaf symbols.

Image source: Getty Images.

So what

On Friday, the two chambers of Virginia's General Assembly passed marijuana legalization bills. The two must be reconciled for consistency's sake; afterward, the combined version will be sent to legalization supporter Gov. Ralph Northam for his signature.

Since weed is still illegal (albeit recently decriminalized) in the southern state, no cannabis company has a meaningful operation there. But that's probably not what fueled the great enthusiasm for marijuana stocks on Monday. Rather, it was the increasing likelihood that marijuana would be decriminalized at the federal level and thus made legal in most states.

If that occurs, Canadian weedies -- Tilray, Aphria, Aurora, HEXO, and OrganiGram are all headquartered north of our border -- will have free rein to sell their wares directly to U.S. consumers. Under current federal law, they are prohibited from doing so.

Now what

Momentum is snowballing for federal U.S. decriminalization, and Virginia's move is only the latest evidence of this. While this won't alleviate all the challenges of the marijuana industry, it will significantly improve its prospects. Pot stock investors are right to be enormously cheered by this development.