With the Cannabis 'Table' Set, It's Time to Get Together for the Main Course
Editor's note: It's only a matter of time before the federal government legalizes cannabis...
In fact, it could happen as soon as just months from now.
The two biggest reasons are money and jobs. But in today's Masters Series essay, Cannabis Capitalist editor Thomas Carroll details three other reasons why it's bound to happen in the near future...
With the Cannabis 'Table' Set, It's Time to Get Together for the Main Course
Today, we're closer to the federal legalization of cannabis than ever before...
As I explained yesterday, the table is set and the world is ready. We covered the first two reasons why I believe cannabis will be legalized in the near future – tax money and jobs.
And now, we're going to discuss the three other parts of the cannabis table setting...
Your No. 1 Asset
Right now, the global pandemic is proving a point I've made my entire career. Your health is your most important asset... Without it, nothing else matters.
The emergence of COVID-19 may be another reason to legalize cannabis.
The plant has provided reams of information about its medicinal properties. GW Pharmaceuticals (GWPH) even has a seizure drug approved by the U.S. Food and Drug Administration that harnesses the power of a cannabis compound. It's called Epidiolex.
Other companies, such as Emerald Bioscience (EMBI), are working on cannabis-derived therapies for glaucoma.
Why shouldn't cannabis, with its many proven medicinal properties, be readily available to all scientists seeking a therapy or cure for whatever pandemic strikes next? Make no mistake, there will be a "next" pandemic with global reach. And the mortality rate could be much higher than COVID-19.
Right now, cannabis is not allowed to be investigated as a solution to our health needs.
The world is waking up to the potential of cannabis as a medicinal compound. And because there's been relatively little research done on cannabis in the past, the scientific community is making up for lost time by looking at its effects on a wide array of conditions.
The current pandemic should accelerate the discovery of new therapeutics, including cannabis. It's only a matter of time before the government will begin to agree with us and others.
That brings us to the fourth point...
Count the Votes
In picking health care stocks, understanding health policy is paramount. This means keeping abreast of everything going on legislatively, both at the state and federal level.
At the beginning of my career, a mentor once said to me, "It's simple to know if a bill will become a law – just count the votes!"
In spirit, this is exactly what must be done. However, it's a difficult task as congresspeople don't typically come right out and announce how they will vote on a bill. We must look for proxies – other datapoints that suggest who will support a bill or not.
This is especially true if the proposed law is controversial... But that doesn't look to be the case with cannabis.
Wait... what? Cannabis is super controversial, isn't it?
Not really. Two-thirds of the U.S is now totally fine with cannabis as a legal substance. The chart below illustrates this support since 1969. Acceptance has been rising since 1989...
And there have been many bills introduced in both the Senate and the House of Representatives dealing directly and indirectly with cannabis...
Prominent bills such as the STATES Act (Strengthening the Tenth Amendment Through Entrusting States Act), the MORE Act (Marijuana Opportunity, Reinvestment, and Expungement Act), and the SAFE Banking Act (Secure and Fair Enforcement Banking Act) have considerable congressional support.
Don't believe us? Let's count the votes...
Historically, there has been a partisan divide on cannabis legalization. Democrats tend to favor it, while Republicans remain more uncomfortable.
But in looking at the constituency, eight out of 10 Democratic voters support cannabis legalization. More importantly, 55% of Republican voters also support the effort. Only one group, those over 75 years old, continues to disagree with legalization.
So, if a definitive majority of Americans want this to happen, what's taking so long?
In a word: Congress.
In 2016, cannabis nonprofit National Organization for the Reform of Marijuana Laws ("NORML") released its congressional scorecard on marijuana policy.
This was only four years ago. At the time, only two senators and 20 representatives earned an "A" grade indicating they publicly supported cannabis legalization and regulation.
This is in stark contrast to that of the voting public.
Senators and representatives are notoriously slow in recognizing and adapting to changing public opinion. And beyond that, most don't want to rock the boat with potentially controversial policies that could hamper reelection chances.
So as we said, in 2016, 20 House members supported legalization out of 435. In the Senate, only two supported it out of 100.
But Congress does react to its constituents eventually. After all, this is an election year.
Unfortunately, the NORML congressional scorecard has not been updated. However, there are other places we can look to see who supports legalization and who doesn't...
In the House, the SAFE Banking Act gives us a good proxy.
The bill was passed on September 25, 2019 with 321 (76%) representatives voting in favor and 103 (24%) voting against. This bill continues to sit in the Senate, where it could be picked up anytime.
In the Senate, it's more difficult to "count the votes," as the SAFE sister bill (S.1200) has not been voted on yet. However, if we dive a bit deeper, we can look to see who has co-sponsored the bill. This gives us a good guess on how the votes might be counted.
We find 34 co-sponsors in the Senate. This is much higher than the 2016 NORML analysis that found only two supportive senators. But it is still not enough to move the bill to the next step.
In the Senate, a bill requires 51 votes. So while much progress has been made in the last four years, 17 more votes are needed in the Senate for this bill.
But there may be more support than we think...
We recently attended a webinar hosted by Arcview Market Research, a multifaceted company supporting cannabis research and investment. The topic was federal legalization, and guests included Sen. Cory Gardner and Rep. Earl Blumenauer. Joining the congressmen were other professionals from the industry.
A prominent theme was "the votes are there" in the Senate. The source of this view is the 34 co-sponsors of the cannabis supportive bills in the Senate.
While no one in politics will make a prediction about anything (that's what we are for), it is my view that the webinar participants feel strongly that the Senate could get something done immediately.
This is incredibly encouraging and supports our view that something meaningful will happen in the Senate this year or certainly early next year.
The only question is whether someone else will beat it to the punch...
A Great Political Weapon
That's right. Like him or not, President Donald Trump would very much like to retain the White House. (We're not sure about Melania.) And on the flip side, Joe Biden is looking for a promotion.
They're both looking for big wins... an election year success story that will help build his base and support current administration initiatives for the next four years.
This is becoming even more important as Biden is leading in the polls... including key battleground states such as Michigan and Pennsylvania. In fact, Trump is trailing Biden by a wider margin than any winning president in decades.
While polls can be misleading, their results guide decision-making in election years. This alone may push both of them to accelerate meaningful federal legislation this year or early in 2021.
What would launch the next administration?
It would have to be historic... It would have to be controversial... It would have to be successful in Congress... And it would have to be the biggest thing yet.
Legalizing cannabis at the federal level fits the bill perfectly.
Trump or Biden would relish his role as the president who legalized marijuana (or at least created the first federal law loosening restrictions).
Moreover, there is a potential partner in the Senate – Majority Leader Mitch McConnell.
McConnell is from Kentucky. One of the biggest new crops in the state is hemp – a cannabis plant. Hemp is now legal to grow at the federal level. The 2018 Farm Bill allowed hemp to be grown without federal interference.
This was a massive win for McConnell in his home state. It is very reasonable to believe that the next president will look to McConnell in the Senate for help.
What Could Go Wrong?
Despite how compelling the argument is for federal loosening of cannabis regulations, we see three main risks to our argument...
First, anything cannabis-related will be considered controversial. Regardless of how strong the datapoints may be, it's always easier to delay... especially in an election year.
Second, Sen. McConnell is a key figure in our Trump part of the thesis. He has been very clear and on the record about "hemp's illicit cousin," as he calls it. Of course, he is referring to cannabis containing THC, the compound that provides a "high." If this is his honest view, then cannabis legislation will stay locked down.
However, might this be his public view in order to legalize hemp? He was successful in doing just that in 2018.
In gaining support, he had to differentiate hemp from cannabis containing THC (even though hemp is a cannabis plant). He did this for Kentucky – his state, which grows a lot of hemp.
We continue to believe that McConnell could be swayed, as he has already been successful in cannabis policy. And he would certainly change his stance if it meant keeping the Senate under Republican control... He and 22 other Senate Republicans must stand for reelection this year, including Cory Gardner, a Republican from Colorado who faces a competitive reelection in his left-leaning state.
Third, as you're well aware, there's an ongoing pandemic right now. As COVID-19 continues to spread, it will remain in the mind of Congress. This may continue to delay all debates... not just ones on cannabis.
So there they are... Five very realistic reasons why cannabis could see big federal support through the rest of this year and heading into 2021. Let's review. Legalizing cannabis...
- Will immediately drive large, new tax revenue for states and the federal government.
- Will immediately create jobs across all states and at the federal level.
- Will support the development of new medical therapies for all manners of illness – including the next pandemic.
- Has support in both the House and the Senate. It could be voted on and approved literally today.
- Would give either Trump or Biden a massive chapter in the history books. This is likely the most important thing to Trump. And for Biden, he would be behind a long-supported Democratic issue. And it would support either administration with the promise of new revenue for states and new jobs for hundreds of thousands of people.
The table is set... The only thing to do now is call everyone together for the meal.
Happy investing,
Thomas Carroll
Editor's note: Thomas believes the federal legalization of cannabis is coming sooner rather than later. In order to position yourself for the life-changing profit potential moving forward, you must get started right now. And it's not just about the federal level...
You see, according to Thomas, a much more subtle policy change is about to open this market to 45 million Americans virtually overnight. He just put together a brand-new presentation to help everyday investors get ready for this shift. Learn more right here.