What happened

Shares of Canadian cannabis company Tilray Brands (TLRY -1.13%) started off the week with a serious bounce. Just after the market opened Monday morning, Tilray shares jumped by more than 11%. But it's been all downhill from there. As of early Friday, the stock had not only given up those double-digit percentage gains, but was down by about 22% for the week, according to data provided by S&P Global Market Intelligence.

So what

It wasn't just the whims of market traders that caused the volatility. It was politics. Or perhaps more accurately, it was politicians. The initial spike in Tilray and other cannabis stocks came after reports surfaced that Senate Majority Leader Chuck Schumer hoped to pass two cannabis reform bills before the holiday break. The New York Democrat planned to roll those bills into other legislation that is expected to pass the Senate. But that's not how things panned out. 

marijuana leaf over stock chart with red arrow down.

Image source: Getty Images.

Now what

Democrats were hoping to include the provisions of the SAFE Banking Act -- which has already passed in the House of Representatives several times -- in the National Defense Authorization Act (NDAA) -- a large-scale "must pass" defense funding bill. Top Republicans, however, managed to prevent the marijuana reform provisions from being attached to the version that was finalized Tuesday night. The broad defense bill will undoubtedly pass the Senate in its final form, but it won't include marijuana banking reform. 

Federal banking laws keep Canadian marijuana companies like Tilray from doing business even in U.S. states that have legalized pot. Tilray already has beer, spirits, and hemp businesses in the U.S. that it hopes will eventually serve as its infrastructure for cannabis sales, too. And while the SAFE Banking Act's provisions fall far short of full federal legalization of cannabis, it would be a notable step in the legalization direction, and would certainly be helpful to businesses in the marijuana industry. But given that it now looks unlikely that those banking restrictions will be lifted this year, the air has come back out of the pot balloon this week.