By Victor Reklaitis
While cannabis stocks have soared this week after Democratic wins in Georgia’s runoffs put that party in control of the U.S. Senate, one analyst has warned the rally looks overdone.
“Investors in cannabis producers, including Tilray (TLRY), Canopy Growth (CGC), and Aurora Cannabis (ACB), are likely overestimating the odds for federal decriminalization and descheduling along the lines of the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act that passed last month in the House,” said Beacon Policy Advisors analyst Charlotte Jenkins in a note Thursday.
“Passage of the MORE Act is unlikely even in a Democratic-controlled Senate because there is likely not enough Republican support to reach the requisite 60 votes to pass the MORE Act or Schumer’s similar legislation,” she added, referring to Democratic Sen. Chuck Schumer of New York, who is set to become the chamber’s majority leader.
The Senate’s filibuster rule requires 60 votes to end debate on most items and allows the minority party to stymie the majority’s efforts. With the Democratic victories in Georgia, the party will have 50 seats in the 100-seat chamber and only get control of it because a Democratic vice president, Kamala Harris, will cast tiebreaking votes.
Others who are tracking the prospects of cannabis-related legislation also are highlighting how getting to 60 votes would be key.
“The federal decriminalization of marijuana certainly becomes more likely with Democrats in control of the Senate, though any major legislation would need 60 votes in the upper chamber to avoid a filibuster,” said Michael King, co-founder and CEO of a California-based cannabis company, Kings Garden, in a statement.
Tilray /zigman2/quotes/209129655/composite TLRY +1.33% has gained 40% this week, while Canopy Growth /zigman2/quotes/200603886/composite CGC +1.50% /zigman2/quotes/202205609/delayed CA:WEED +1.28% is up 24% and Aurora Cannabis /zigman2/quotes/210559470/composite ACB -0.09% /zigman2/quotes/203734337/delayed CA:ACB -0.29% also has jumped 24%.
The Cannabis ETF /zigman2/quotes/213173823/composite THCX +0.43% has advanced 21% for the week, the ETFMG Alternative Harvest ETF /zigman2/quotes/204332491/composite MJ -1.19% has added 18%, and Cronos Group /zigman2/quotes/206842762/composite CRON -3.72% /zigman2/quotes/202715342/delayed CA:CRON -3.94% has climbed 29%.
Beacon’s Jenkins is more upbeat on the SAFE Banking Act ‘s chances. That measure aims to protect banks /zigman2/quotes/201006419/composite KBE +0.37% that work with the cannabis industry. It passed the Democratic-run House in 2019.
“Though Schumer and other Democrats will push for full decriminalization and will emphasize the racial justice aspects of that type of legislation, the SAFE Banking Act is the most likely cannabis legislation to pass in the next two years,” she wrote.