What happened
On what otherwise appears to be a slow news day for the sector, shares of marijuana stocks Sundial Growers (SNDL 3.08%), Aurora Cannabis (ACB -0.15%), and Canopy Growth (CGC 2.41%) are all on the upswing today.
As of 1:15 p.m. ET, Sundial stock is gaining 3.3%, Aurora is up 5.2%, and Canopy Growth is leading the sector higher with a 5.3% gain.
Image source: Getty Images.
So what
What's got investors feeling so high on weed stocks today? In the absence of any other big news, it would appear that the removal of the threat of competition from alternative drugs is enough. We're talking about psilocybin, also known as "magic mushrooms."
As the movement to legalize marijuana in America gains steam, there's been an unintended side effect for fans of the drug (and the stocks of the companies that sell it). Specifically, there's a parallel movement to legalize all drugs, especially psychedelics like psilocybin.
The problem is, however, if psychedelics get legalized at the same time as marijuana becomes legal -- or even just lag marijuana in legality by a year or three -- investors who are banking on legal weed turning into a growth industry could find their buy theses derailed by competition from all sorts of other drugs. Such an event would logically slow the growth rate of cannabis sales, therefore making cannabis companies like Sundial, Aurora Cannabis, and Canopy Growth less valuable.
That's the bad news. Now here's the good: The psilocybin legalization movement is getting off to a very slow start -- and just hit a new bump in the road in California.
According to Tripsitter.com, to date, only one state (Oregon) and one almost-state (Washington, D.C.) have fully decriminalized use and possession of magic mushrooms. California -- the most populous state in the nation and one where "selected municipalities" have decriminalized the drug -- was supposed to become the second state to legalize psilocybin statewide.
But as MarijuanaMoment.net reports today, an effort to gather signatures to put legalization of psilocybin on the ballot in California has fallen far short of getting the required 623,212 signatures. (In fact, it seems to have racked up less than half the John Hancocks needed).
Now what
What does this mean for marijuana investors? Well, it doesn't quite pluck out the threat of competition from magic mushrooms. But as MarijuanaMoment explains, it does mean that legalization of psilocybin now can't happen this year, next year, or any year before the November 2024 elections, at the earliest.
That pushes possible implementation of legalization even farther down the road -- probably 2025 in the best-case scenario -- and means that marijuana investors needn't fear competition from magic mushrooms in the largest state market in the U.S. for another three years.
No wonder marijuana investors are happy today.
