The stars are now aligned for cannabis investors.
That’s because presidential candidate Donald Trump is on board with cannabis reform in a big way.
He’s obviously making a play for swing state voters who heavily favor cannabis reform. But whatever his motive, the Trump news is very bullish for cannabis stocks.
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The reason: It means that now both presidential candidates favor four significant cannabis reforms.
Cannabis stocks have not fully adjusted to the change, which suggests they are a buy here.
4 Key Reforms That Will Boost Cannabis Stocks
Here are the four key reforms that Trump supports. Vice President Kamila Harris also supports them.
#1: Rescheduling
The reason rescheduling would be bullish is that companies currently cannot deduct operating expenses against the sales of a Schedule 1 drug, which is where cannabis is listed under the Controlled Substances Act. A move to Schedule III would neutralize the IRS rule (280E) barring the deduction of operating expenses against Schedule I substance sales. This would drop huge amounts of cash flow onto cannabis company financial statements.
#2: Banking Reform
This would allow banks to serve cannabis companies. This reform is called SAFER banking, which is short for the Secure and Fair Enforcement Regulation Banking Act.
#3: Decriminalization
Both Trump and Harris support decriminalization or legalization of possession of small amounts of cannabis for personal use.
#4: Florida Recreational Use
Trump’s support for this change could seal the deal on recreational use for Floridians. They will weigh in on rec-use legalization in a referendum called Amendment 3, this November. Currently, Florida only permits medical-use sales.
The reason Trump’s support is so important: Various polls before the Trump endorsement consistently showed it would be a close vote. The referendum needs 60% support to pass. Poll results showed support hovers a bit below and above that threshold.
Since holdouts are more likely to be on the right, the Trump endorsement of the amendment will increase the odds of Amendment 3 approval considerably. So will the recently announced support from conservative Roger Stone, and an association called Florida Young Republicans in the state.
Amendment 3 approval will boost the stock prices of cannabis companies with large exposure to Florida. I suggest all the big ones as part of my Cabot Cannabis Investor cannabis portfolio.
Given her stance on legalization, I assume Harris also supports recreational-use legalization in Florida. Her vice-presidential candidate, Minnesota Gov. Tim Walz, legalized cannabis as governor of Minnesota, so we know where he stands on all of these policy issues.
In a Trump cannabis policy update posted at his media company Truth Social on September 9, he made it clear he supports all four of these key reforms: Rescheduling, banking reform, decriminalization and legal recreational use in Florida.
“I believe it is time to end needless arrests and incarcerations of adults for small amounts of marijuana for personal use,” said Trump in his social media update. “We must also implement smart regulations, while providing access for adults, to safe, tested product. As a Floridian, I will be voting YES on Amendment 3 this November. As President, we will continue to focus on research to unlock the medical uses of marijuana to a Schedule 3 drug, and work with Congress to pass common sense laws, including safe banking for state authorized companies, and supporting states’ rights to pass marijuana laws, like in Florida, that work so well for their citizens.”
A few days earlier in an interview with the popular podcaster Lex Fridman, Trump praised cannabis. “Medical marijuana has been amazing. I’ve had friends, and I’ve had doctors telling me that it’s been absolutely amazing,” he said.
Of course, progress on federal-level reform will depend on which parties control the Senate and the House, and the key cannabis-related committees in Congress. However, the fact that the presidential candidates both support significant change is quite bullish for the group, medium term.
It’s about time because the majority of voters in both parties support cannabis reform, according to various polls. I don’t encourage cannabis use, but if you believe that individual liberties are core to the U.S. system and economic engine, cannabis reform seems logical. This is what the majority now thinks, too.
I’m apolitical, but it’s obvious what’s going on here. Polls show that voters in swing states widely support cannabis reform. Clearly, internal polling by the Trump campaign confirms substantial, widespread cannabis reform support, especially in the swing states, or he would have not announced his favorable cannabis policy. As a general rule, internal polling by campaigns is more accurate than the polls you read about in the media, though they are not terrible.
For analysis of the best cannabis companies to own and other ongoing legal, social and cultural changes that favor the group, please join me as a subscriber to Cabot Cannabis Investor.
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