Much as it has for the last few years, the next bullish catalyst for cannabis stocks lies in the hands of politicians.
And those catalysts are emerging on two fronts, namely, the state and federal level.
On the state level, where there are the most short-term catalysts (which we’ll explore below), cannabis companies have been getting solid support.
Forty states now allow sales of medical cannabis.
Currently, excess permitting is putting downward pressure on cannabis pricing, which will ultimately be resolved by the market itself when companies are lean enough to produce profits. We’re not there yet, but it’s coming.
Federally, it’s been a story of fits and starts. Under the Biden administration, the government took a more aggressive stance on rescheduling, something that would lead to immediate profitability by expanding permitted federal tax deductions.
Ultimately, the Biden administration failed the sector.
Now it’s up to President Trump, who’s promised to achieve rescheduling and implement SAFER banking reform.
I’ll continue to take Trump at his word and invest under the assumption that he will get around to his promised cannabis reforms, although cannabis reform is not at the top of his list of goals. But sooner or later, his Department of Justice will get around to rescheduling. That will be a big catalyst for cannabis stocks.
And despite delays in rescheduling arising from legal disputes about Drug Enforcement Administration (DEA) behavior, at least one industry CEO remains optimistic on the prospects for progress.
“You are seeing action,” Cresco Labs (CRLBF) CEO Charlie Bachtell said in a recent interview with the cannabis podcast AlphaNooner. “At the inaugural celebration they even had a desk on stage and he was signing executive orders that day in that arena. So, objectively looking at it, this seems like an administration that is going to take action on issues that Trump brought up along the campaign trail,” said Bachtell. “Fortunately for us, cannabis has been part of that narrative. There were three very public statements where he laid out his evolved position on our subject matter. What I took from it is that a common-sense approach is needed for cannabis and the industry is ready.”
While the federal government dallies, states will continue to make progress on favorable reform, as I mentioned above.
Gov. Josh Shapiro (D) recently reiterated he wants Pennsylvania to legalize recreational cannabis use so that his state stops giving up tax revenue to Maryland, Ohio, New York and New Jersey. Pennsylvania residents cross state lines to buy in those states. Polls show a majority of voters in the state favor the change.
Hawaiian lawmakers are taking another shot at legalizing recreational-use cannabis. In late January, House Judiciary and Hawaiian Affairs Chair David Tarnas (D) and Senate Health and Human Services Committee Chair Joy San Buenaventura (D) filed a bill that would allow adults to purchase rec-use cannabis.
Smart & Safe Florida has filed to put another recreational-use cannabis referendum on the Florida ballot in 2026. A Smart & Safe Florida referendum that would have legalized recreational cannabis, called Amendment 3, failed last year. In a major setback for cannabis investors, the referendum got 56% of the vote, below the 60% needed for approval.
The bottom line: The potential Florida vote is over a year away, and it is hard to predict when change will really happen in other states. We also don’t know when federal reform will play out. So, cannabis investors need patience.
But there is a tactical step you can take to make the wait easier. “Get paid to wait” by owning cannabis sector companies that pay rich yields but will post capital appreciation if reform progresses. I own and I’m suggesting two that pay yields of 16.3% and 12.4%. For these names and other potentially good cannabis investments including names with exposure to the ongoing market growth in Europe, consider subscribing to Cabot Cannabis Investor here.
