February has been a very good month for marijuana stocks, not least because it started with a clutch of powerful senators pledging to move on cannabis law reform within the next few months.

This is extremely good news for marijuana stocks -- no wonder the news spurred a big rally for them. In this Motley Fool Live segment recorded on Feb. 5, 2021, veteran Motley Fool contributor Eric Volkman and healthcare and cannabis bureau chief Corinne Cardina discuss how the senators' promise will soon affect marijuana law.

Corinne Cardina: Democratic senators said this week that they plan to pursue significant cannabis reform legislation. So the Senators said they will release a "Unified discussion draft on comprehensive reform early this year, and then passing the legislation will be a priority for the summit."

We saw a lot of Cannabis stocks rejoicing. This happened on Monday [Feb.1]. So since Monday, we've got Canopy Growth (NASDAQ:CGC) up 8%, Aurora Cannabis (NYSE:ACB) up 17%, Cronos (NASDAQ:CRON), nearly 20%.

Eric, what do we know about this plan so far and what do we not yet know? Can you put it also in terms of where this falls on the spectrum of decriminalization to full federal legalization? How big of a deal is this and what do we know?

Eric Volkman: Sure. It certainly is a big deal, what you had was three Democrat senators and three quite prominent Democrat senators.

The most prominent being Chuck Schumer, the new Majority Leader in Senate. Also, Cory Booker, who's a high-profile senator from New Jersey, who always seems to be in the news. He always seems to be on top of any interesting issue that could garner in some press.

Also, Ron Wyden, who is probably a little bit less known to the general public, but he's one of the senators from Oregon. Oregon has relative to the other American states, has had a long history with legalization. They legalized medical marijuana a long time ago. They were very early in legalizing recreational marijuana too.

So what they did, they issued a joint statement several days ago, I don't have the exact date, in which they said that marijuana reform, as they put it, is going to be a priority for the Senate. That they're going to get the ball rolling in what they say is the early part of the year. What does "early part" mean? Well, they didn't get more specific.

There's a lot we don't know about it simply because of that lack of specificity. It was a fairly short statement, only a few paragraphs long. We know that they are going to try to advance something. What form this is going to take? Again, that's a question. There is legislation that has been passed in the House of Representatives last year. We have the MORE Act which would essentially decriminalize marijuana, and then the SAFE Banking Act, which would pave the way for cannabis companies to use financial services like any other company.

So we don't know. [The senators] studiously avoided using the words decriminalization or legalization. Most likely, the talk so far, such as there has been, has been about decriminalization. That's what Kamala Harris promised in the Vice Presidential debate before Election Day last year.

The big distinction between decriminalization and legalization: Decriminalization simply means that you're not going to be prosecuted for a marijuana-related offense of any size. As long as you don't bring like a truck full of the stuff across state lines, you're probably going to be OK.

That does not mean legalization. That doesn't mean that you can all of a sudden set up outside of your house a marijuana stand and sell it along with your kids' lemonade. It doesn't work that way. It doesn't open a market for it at all.

Legalization, on the other hand, as we've seen with a whole clutch of states -- 15 now plus the District of Columbia -- means that you can open a market. You could start a business within certain constraints as long as you have a license to do so.

So, legalization means that there can be a legitimate business of some form in the marijuana trade. Decriminalization simply means you're not going to go to jail for it.

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.