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Why Sundial Growers, Charlotte's Web, and Other Marijuana Stocks Popped This Morning

By Rich Smith – Jul 14, 2021 at 12:06PM

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The new marijuana legalization bill is finally here! (Sort of.)

What happened

Marijuana stocks lit up Wednesday morning after multiple news outlets reported Senate Majority Leader Chuck Schumer plans to unveil a new bill to legalize marijuana for recreational use today.  

In quick succession, shares of Sundial Growers (SNDL 5.45%), Charlotte's Web Holdings (CWBHF 2.65%), Curaleaf Holdings (CURLF -0.34%), and Green Thumb Industries (GTBIF 2.36%) all shot up anywhere from 3.4% to 4.8% -- but those gains were soon to fade. As of 11:45 a.m. EDT, we now see Curaleaf and Green Thumb up only 1.3% and 2.3%, respectively, while Sundial and Charlotte's Web are down 2.6% and 4.3%, respectively.

Marijuana plants

Image source: Getty Images.

So what

Why is that? As it turns out, the details of today's news are actually a bit of a letdown for anyone betting that marijuana was about to become suddenly legal.

As MarijuanaMoment.net explains, what Sen. Schumer actually did this morning was not introduce a marijuana legalization bill for a vote in Congress, but instead just show off a "first draft" of the bill -- and ask the public to comment on it.

Granted, after reviewing the 163-page "Cannabis Administration and Opportunity Act," MarijuanaMoment observes it appears designed to "federally deschedule cannabis, expunge prior convictions, [and] allow people to petition for resentencing." On the other hand, federalizing marijuana legalization under the bill's present language would not necessarily make marijuana legal in states that want to ban it. The bill as written specifically preserves states' rights to outlaw the drug. (And in states where sale is legal, the bill would also levy a federal tax on marijuana products -- 10% at first, rising eventually to 25%, presumably on top of state taxes already imposed.)

Now what

That being said, perhaps the biggest letdown for cannabis fans today is that the bill won't become law anytime soon. Rather, the draft will remain open for comment until at least Sept. 1. Then the bill must pass the Senate, be reconciled with a competing bill in the House, and go to the president for signature. Even then, marijuana won't become legal for another 60 days, when the drug is finally stricken from the Controlled Substances Act.

As comments are collected and the legislative machine grinds forward, the advantages of the legislation (for marijuana fans) could fade. Long story short, "this is not the final form the bill will take," warns MM, and we're still at least four months, and probably many more than that, away from true marijuana legalization.

On the bright side, though, I guess you could say that there's still plenty of time for marijuana stocks to bounce back before marijuana finally is legalized.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Charlotte's Web Holdings and Green Thumb Industries. The Motley Fool recommends Charlotte's Web. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Sndl  Stock Quote
Sndl
SNDL
$2.71 (5.45%) $0.14
Green Thumb Industries Stock Quote
Green Thumb Industries
GTBIF
$13.00 (2.36%) $0.30
Charlotte's Web Stock Quote
Charlotte's Web
CWBHF
$0.60 (2.65%) $0.02
Curaleaf Holdings, Inc. Stock Quote
Curaleaf Holdings, Inc.
CURLF
$6.62 (-0.34%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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