Cannabis investors did exactly the wrong thing July 29 following the publication of a Fox News poll showing Vice President Kamala Harris has caught up to and surpassed Donald Trump in five key swing states.
They sold the sector. The AdvisorShares Pure U.S. Cannabis ETF (MSOS) closed down for the day.
Bad move, cannabis investors.
Not only is Harris a better cannabis advocate than President Joe Biden, she’d obviously be more favorable to the sector than Trump.
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Here’s why any news showing further support for Harris among voters should move cannabis stocks higher.
Harris Is Clearly Better than Trump for the Sector
While Harris supports full legalization, Trump does not. Indeed, he literally calls for the death penalty for drug dealers. His logic is that a similar policy in China explains lower levels of drug abuse there.
Of course, Trump is predominantly referring to more dangerous drugs like fentanyl. But he’s never been a big fan of cannabis reform. He believes cannabis use causes lasting cognitive impairment. He thinks state-level legalization has created “big problems.” And Trump suggests there may be a link between “genetically engineered” cannabis and mass shootings.
On the other hand, Trump is not entirely negative for the sector. He supports legalization of medical cannabis. He thinks cannabis policy should be left to the states, which implies a green light for further state-level legalization. When he was president, Trump declined to crack down on cannabis, even after his Attorney General Jeff Sessions rescinded the Obama-era “hands off” policy on enforcement of federal cannabis laws.
But if the Biden administration fails to reschedule cannabis, don’t expect any progress under a Trump presidency. In rescheduling, cannabis would move to Schedule III from Schedule I under the Controlled Substances Act. The change would help cannabis companies by neutralizing the impact of an Internal Revenue Service provision (Rule 280E) which bars the deduction of operating expenses against revenue from the sale of Schedule I substances like cannabis.
Trump won’t champion the issue. In contrast, Harris strongly supports rescheduling and she has asked the Drug Enforcement Administration (DEA) to move forward with it “as quickly as possible.”
As a Senator, Harris sponsored a legalization bill called the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act. “Times have changed. Marijuana should not be a crime,” she said at the time. She also co-sponsored the Secure and Fair Enforcement (SAFE) Banking Act, which would allow banks to serve cannabis companies.
Harris Is Better for Cannabis Reform than Biden Was
Biden opposes recreational-use legalization. In contrast, Harris backs full federal legalization of cannabis. That’s obviously a huge improvement for the sector.
Biden also has a history of anti-cannabis views. As chair of the Judiciary Committee years ago, he helped shape drug policy that stigmatized cannabis. He has described cannabis as a gateway drug that leads people to use more dangerous drugs, whereas Harris refutes this view. In short, Biden was out of step with the majority of voters who favor recreational-use legalization.
Harris is also better for the sector because according to recent polls, she stands a better chance than Biden of beating Trump.
Harris’s Potential Running Mates Support Cannabis Reform
We don’t know who Harris will pick as her vice-presidential running mate. But everyone on the short list is pro-cannabis reform in one way or another.
These contenders have all supported rec-use legalization: Pennsylvania Gov. Josh Shapiro, California Gov. Gavin Newsom, Michigan Gov. Gretchen Whitmer, U.S. Transportation Secretary Pete Buttigieg, Colorado Gov. Jared Polis, Illinois Gov. J.B. Pritzker, Minnesota Gov. Tim Walz, and Kentucky Gov. Andy Beshear.
All the others on the short list back cannabis reform as well, in one way or another. North Carolina Gov. Roy Cooper (D) supports medical marijuana legalization in his state. Sen. Mark Kelly (D-AZ) has supported rescheduling and banking reform that favors cannabis companies. Maryland Gov. Wes Moore (D) has served on the board of Green Thumb Industries (GTBIF), and he granted pardons for cannabis convictions.
In contrast, Trump’s running mate Sen. JD Vance (R-OH) opposes recreational-use legalization. He has also voted against a cannabis banking reform bill called the Secure and Fair Enforcement Regulation (SAFER) Banking Act which would allow banks to serve cannabis companies.
A Harris Victory Would Imply Other Big Wins for Cannabis in November
Several states have initiatives on the ballot this November that would allow voters to approve major cannabis reform. The big one is Florida, where voters get to decide whether to make recreational use legal. Polls showing that Harris may win suggest big turnouts in favor of pro-cannabis initiatives like the one in Florida.
Besides Florida, recreational-use legalization will likely be on the ballot in North Dakota. Medical use legalization will likely be on the ballot in Nebraska. Expansion of medical use will be on the ballot in Arkansas. And cannabis decriminalization will be on the ballot in several local elections in Texas.
The bottom line: A lot can happen between now and November. But if Harris continues to poll well against Trump, I expect cannabis investors to catch on and cannabis stocks to catch a bid – which suggests they are a buy in the steep sell-off since May.
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