America’s drug laws are a messy patchwork quilt. Eleven states and the District of Columbia have already legalized marijuana for recreational use, and all but eight states have allowed marijuana to some degree for medicinal purposes or have at least partially decriminalized marijuana or its derivatives like CBD oil.
Yet at the federal level, the legal pot industry remains in a sort of limbo. Marijuana remains an illegal Schedule I substance under federal law, and businesses related to it face a precarious existence, never really knowing when a fickle Justice Department might decide to put them out of business. There is a reason why the larger players in this space, such as Canopy Growth Corporation (CGC) and Cronos Group Inc (CRON) are domiciled in Canada and the good ol’ USA.
With a presidential election just weeks away, let’s take a look at which candidate is more bullish for the cannabis industry. Ultimately, Congress wields more power than the presidency here, as it is Congress that would be responsible for re-writing national drug laws. But all the same, the executive branch has a lot of discretion in how it interprets the law and prosecutes it, so the man in the White House matters.
So with no further ado, let’s look at the potential impact on pot stocks under a second Donald Trump term or a new Joe Biden administration.
How Would a Second Trump Term Affect Pot Stocks?
For a man who seemingly has an opinion on everything, President Trump has been conspicuously silent on marijuana issues. He’s said on the record that he considers it a state issue and has avoided addressing it further. It’s not a big enough priority for him to tackle at the federal level, but he doesn’t seem to mind the states going their own ways.
Trump’s choice of attorney general is more important here, as this seems to be an issue he’s personally not willing to touch.
Here, it’s a mixed bag. Trump’s first attorney general, former Alabama senator Jeff Sessions, was an anti-pot crusader and was adamantly against legalization. Sessions resigned two years ago, and his replacement – William Barr – seems to share Trump’s general lack of interest on the matter. In Senate testimony last year, Barr said that he considered the current legal situation “intolerable” because it put state and federal laws in contradiction of each other and indicated that he would support de-federalizing marijuana regulation and just punting to the states.
We don’t know if Barr would stick around for a second term. But if he does, it would seem like the most likely outcome is a continuation of the status quo: States will continue to loosen their drug laws, and the federal government will essentially shrug. If Congress passed a bill to legalize and regulate marijuana at the federal level, Trump would likely sign it. But he’s not going to make the first move.
Would a President Biden Legalize Pot?
Democrats are generally seen as being a little more open minded on soft drug use, though former Vice President Biden is no libertine when it comes to marijuana. He’s supported the idea of “decriminalization,” but has stopped short of supporting “legalization.”
In other words, he wants to stop locking up the casual pot smoker in prison, but he’s not quite ready to allow marijuana to be sold and regulated like alcohol or tobacco. He’s firmly on the fence and has indicated he wants to see more information on the potential public health effects before making a decision.
Biden’s running mate, Kamala Harris, has embraced full legalization. If the democrats take the Senate and keep the House in November, they may pass a legalization bill. And if they do, Biden probably won’t stand in the way by vetoing it. But if you’re looking for a president to push hard for legalization, Biden’s not your guy.
So, there you have it. A Biden presidency wouldn’t be all that different from a Trump presidency when it comes to the legalized pot industry. It’s really going to come down to which party takes Congress.
If we see a “blue wave” in November, then full legalization is very likely. It’s an easy, low-risk win for the democrats and something that would be broadly popular to their base. This would be bullish for pot stocks. But if the republicans hold on to the White House or two at least one house of Congress, it’s likely going to be a continuation of the status quo. That’s not bearish for pot stocks, but it’s not wildly bullish either.
Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog.
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