What happened

Shares of cannabis companies Canopy Growth (CGC 2.41%) and Aurora Cannabis (ACB -0.15%) both plunged more than 10% in early trading Thursday morning. Canopy Growth quickly recovered most of its losses, and as of 10:30 a.m. ET today is only down about 1.8%.

Aurora Cannabis didn't and is still down a depressing 7.2%. The question is why. And the answer seems to be: Congress.

So what

The U.S. Senate is currently preparing the Secure and Fair Enforcement (SAFE) Banking Act for a vote. If passed, the law would make it easier for banks to provide services to marijuana businesses, a positive for marijuana stocks.

And passage actually looks pretty likely this time around, with 42 co-sponsors on the Senate bill, a likely 60 total votes in support, and then a vote in the House of Representatives -- which has already passed the bill multiple times in years past.

The problem is that supporters of marijuana banking reform could run into problems from supporters of full-scale legalization in the House. As cannabis news source Marijuana Moment reports today, House supporters of legalization have just reintroduced the broader Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act for consideration.  

Now what

So if marijuana banking reform is good news for marijuana stocks, then wouldn't actual legalization be even better news?

Sure...if it passes. Full-scale legalization would logically make it easier to buy and sell cannabis, resulting in greater revenue for companies like Canopy and Aurora, greater scale of production, and potentially positive profit margins as a result.

The problem is that the last election cycle saw several supporters of legalization replaced by opponents, and the MORE Act currently has only 33 co-sponsors -- all Democrats. And this suggests that the MORE Act could be viewed as less bipartisan than the SAFE Banking Act.

If, by the time the SAFE Banking Act passes the Senate and moves to the House, legislators there start looking at marijuana regulation in general as a partisan issue, this could actually end up hurting the chances for passage of either bill, with the result that neither the MORE Act nor the SAFE Banking Act pass.

That's the risk in a nutshell: that legalization advocates' reach might be exceeding their grasp. It's a risk worth considering, and today, that's just what investors seem to be doing.