What happened

Shares of multistate cannabis operator (MSO) Cresco Labs (CRLBF -3.98%) rose 24.37% on Thursday. The stock closed at $2.65 on Wednesday and opened at the same price on Thursday. Its shares rose to a high of $3.60 late in the afternoon before closing at $3.29. The stock is down more than 31% this year.

So what

Cresco Labs and other cannabis stocks got a jolt late in the day when President Biden said he was pardoning all prior federal offenses for simple marijuana possession. The thought is that the move is just the beginning of a public focus on federal marijuana legalization. That would open doors for current cannabis companies and obviously make it more likely that individual states will follow by legalizing medical and adult-use sales of marijuana. This is particularly good news for MSOs such as Cresco, because it will allow them to transport product across state lines, giving it stronger inventory control while reducing costs.

Cresco was hardly the only MSO to get a bump from the news as Green Thumb Industries was up 30.33%, Trulieve Cannabis was up 36.02%, Curaleaf Holdings rose 33.12%, and Canopy Growth jumped 22.15%.

Now what

It's been quite a while since there was good news industrywide for cannabis operators. In the short term, expect some investors to use the opportunity on Friday to sell their shares on the news while the prices are up. In the long term, President Biden's move only means something for cannabis operators if it helps the country move toward federal cannabis legalization or at least passage of the SAFE Banking Act, which would make it easier for cannabis companies to get financing from banks.

Cresco Labs is relatively healthy, financially, based on its second-quarter report in which it reported revenue of $218.2 million, up 1.7% over the prior quarter and up 4% year over year. The company said it lost $8.3 in net income but had adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $51 million, up 11% over Q2 2021.

Cresco is in the process of buying Columbia Care for $2.1 billion and said it expects to close the deal by the end of the year. The combined company would make Cresco the biggest MSO in terms of revenue, with $347.8 million in revenue in Q2.