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Will the U.S. Legalize Marijuana in 2022?

By David Jagielski – Dec 23, 2021 at 6:10AM

Key Points

  • There wasn't any notable reform in the cannabis industry this past year.
  • Senator Chuck Schumer is working on a comprehensive bill that could lead to significant changes.
  • Even if federal legalization doesn't happen next year, it's not too early to invest in cannabis stocks.

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Change is definitely coming to the pot sector; it's just a matter of when.

With the Democrats controlling Congress this past year, cannabis investors were hopeful that federal reform could be on the horizon. Unfortunately, such legislative changes did not come to fruition. But marijuana remained in the spotlight during 2021, with lawmakers making multiple attempts to push full legalization forward.

Could 2022 be the year that the U.S. finally legalizes marijuana federally, or will it be another letdown for cannabis investors?

Capitol building with American flag waving

Image source: Getty Images.

Here's why federal legalization could happen

There's more attention on marijuana legalization than ever before, which could be a bullish sign for investors hoping for major changes to the cannabis landscape. According to the Pew Research Center, survey data shows that 91% of U.S. adults are in favor of legalizing marijuana for either recreational or medicinal use. Currently, 36 states permit medical marijuana use and 18 have enacted legislation to allow for recreational use. The issue of marijuana isn't going away, and it's no longer a matter of if marijuana will become federally legal in the U.S. -- it's just a question of when that will happen and what it will look like.

Senate Majority Leader Chuck Schumer is spearheading reform efforts. He's determined to focus on legalization and on a comprehensive bill rather than on a smaller one like the SAFE Banking Act. He said, "we're getting some Republican support, and the country is realizing that all the myths about marijuana are just that -- myths."

Here's what could stymie reform

Schumer released a draft bill on marijuana legalization this year and the feedback on the Cannabis Administration and Opportunity Act demonstrated just how daunting cannabis reform is. In fact, 169 pages of feedback on the bill were given to the Senate. Some of the major issues include taxes, interstate commerce, and what rules the Food and Drug Administration will create.

This complexity makes it likely that 2022 won't be the year of large-scale reform. Many CEOs in the industry agree. recently asked some industry leaders about the prospects of legalization next year. While they were hopeful, they also weren't expecting an easy or quick path to legalization. Curaleaf (CURLF 0.34%) CEO Joe Bayern is more optimistic about the SAFE Banking Act than outright legalization, and Nicholas Vita from Columbia Care offered a sobering reminder that "comprehensive reform happens over many, many years." Aurora Cannabis CEO Miguel Martin was among the least bullish, stating that "contrary to what many will say, legalization isn't happening in the U.S. anytime soon."

Due to all the issues that require consideration in such a large bill, it's unlikely that marijuana legalization will occur in 2022. Whether it even happens during President Biden's term is questionable. President Biden has never said that he supports the full legalization of marijuana (he has only advocated for decriminalization, which would fall short of the more comprehensive reform that Schumer seeks.)

Investing ahead of legalization is still smart

The good news is that even if marijuana legalization is years away, investors can still position themselves for major returns today. Multi-state operator Curaleaf has a presence in 23 states with 113 dispensaries across the U.S. This industry leader has generated more than $1.1 billion in revenue over the trailing 12 months. Curaleaf is an example of a company that would benefit significantly from marijuana legalization by entering more states and growing its presence.

There are plenty of other quality marijuana stocks that could make for lucrative long-term investments. As long as investors remain patient, some excellent profits can be made by investing in the cannabis sector in 2022.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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