Why Marijuana Stocks Are Rocking Today

What happened

Wednesday is turning out to be a great day for investors in marijuana stocks. Shares of Sundial Growers (NASDAQ:SNDL) are up a modest 1.1% in 1:50 p.m. EDT trading, and several cannabis stocks are doing even better than that. Curaleaf Holdings (OTC:CURLF), for example, is gaining 3.7%, Tilray (NASDAQ:TLRY) just popped 4.6%, and Canopy Growth (NASDAQ:CGC) is doing best of all — up 6.2%.

And you just might have the United States Department of Defense to thank for it.

American flag with marijuana plants in the background.

Image source: Getty Images.

So what

The Pentagon, that is…or some opportunistic Congressmen.

As MarijuanaMoment.net reports this morning, cannabis fans in Congress just attached the House of Representatives’ version of the SAFE Banking Act (a law legalizing banks doing business with cannabis companies) to the government’s 2022 National Defense Authorization Act (NDAA) — the law that approves the Pentagon’s budget for next fiscal year.

That sounds like a strange marriage of convenience, but as Rep. Ed Perlmuttter rationalized yesterday, allowing banks to legally work with cannabis companies “will strengthen the security of our financial system in our country by keeping bad actors like foreign cartels out of the cannabis industry.” (See how he got the word “security” in there to justify putting marijuana legislation in a defense spending bill?)

Continuing along the same lines, Perlmutter insisted “this is a public safety and a national security matter — very germane to the issues at hand, dealing with foreign cartels.” (Adding the word “very” makes the argument sound so much stronger!) 

Now what

All kidding aside, not everyone is a fan of Congress straining credibility in this manner. Rep. Mike Rogers, for example, pointed out that a cannabis law really doesn’t belong in the NDAA. Nevertheless, he admitted that the SAFE Act is a “fine piece of legislation.” And this suggests that, whether or not the SAFE Act passes as part of the NDAA, it does seem to have support from both sides of the aisle. (Perlmutter, you see, is a Democrat, while Rogers is a Republican).

Explaining the import of passing the law one way or another, Rep. Lou Correa argued that “cannabis customers and businesses are law-abiding citizens and entities,” and that “it just does not make sense” to force them to do all their business in cash because banks are afraid to serve them.

The bigger question at this point, MarijuanaMoment reminds us, is not precisely what mechanism the House uses to pass the SAFE Act, but whether the Senate will agree to pass it or insist — as Senate Majority Leader Chuck Schumer has advocated — that Congress simply legalize marijuana outright rather than institutionalize the industry piece by piece, as the SAFE Act would begin doing.

In the end, though, what I would advise investors to do is focus on the big picture: There’s a lot of quibbling going on about precisely how, and in what order, to pass the laws that would end up finally legalizing marijuana. But legalization is clearly the direction in which Congress is heading.

Sooner or later, we’re going to get there — and that’s good news for marijuana stocks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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