The past week has been an excellent ride for cannabis stocks. Some of the sector’s leading companies have experienced tremendous growth, shooting into the green by impressive amounts. This rally can be partially attributed to the fact that Germany has opted to legalize cannabis nationwide, a policy scheduled to take effect on April 1.
This development is being seen as widely promising, as other nations may follow. But back in the United States, things aren’t looking as good for growers or distributors. Specifically, a group of Republican lawmakers led by Senator Mitt Romney aren’t happy with the Biden administration’s mission of rescheduling cannabis as lower-risk and have sent a letter to the U.S. Drug Enforcement Administration (DEA) raising their concerns.
For cannabis stocks, this development could be problematic. It has the potential to delay the policy change these companies have been waiting for. However, this effort from a group of Republicans doesn’t necessarily mean the DEA will bow to the pressure.
What This Means for Cannabis Stocks
Many cannabis stocks are rising today, even in the face of the anti-cannabis campaign from Romney and his colleagues. Shares of U.S.-based cannabis producers like Curaleaf (OTCMKTS:CURLF), Trulieve Cannabis (OTCMKTS:TCNNF) and Green Thumb Industries (OTCMKTS:GTBIF) all closed up by 5% or more today. Things have been even better for Canadian cannabis stocks like Tilray Brands (NASDAQ:TLRY) and Canopy Growth (NASDAQ:CGC).
Clearly, the market isn’t overly concerned with Romney’s letter. Nevertheless, it does warrant some consideration. Sen. Romney submitted the letter alongside Ranking Member Jim Risch (R-ID) and Sen. Pete Ricketts (R-NE). In the letter, the group highlights concerns regarding the planned rescheduling:
“As members of the Senate Committee on Foreign Relations, we write to underscore the Drug Enforcement Administration’s (DEA) duty under the Controlled Substances Act (CSA) to ensure compliance with the United States’ treaty obligations under the Single Convention on Narcotic Drugs (Single Convention). Any effort to reschedule marijuana must be based on proven facts and scientific evidence—not the favored policy of a particular administration—and account for our treaty obligations.”
In my view, this seems like a clear attempt from one political party to halt another’s progress. However, contrary to what the authors of the letter imply, facts are on the side of the Biden administration. In January 2024, a review from the U.S. Food & Drug Administration (FDA) found sufficient evidence to support the case for reclassifying marijuana as a “less risky drug.”
With that in mind, it’s unlikely that the letter will sway the DEA in any major way. Cannabis stocks are poised to stay in the green, at least for the short term.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
