Investors Flock to Cannabis Stocks Following Democratic Senate Victory

On January 6, the cannabis stock market experienced an unprecedented surge. Investors began actively buying shares of marijuana producers after learning about the Democrats’ victory in the U.S. Senate elections.

Increased Likelihood of Cannabis Legalization

In the Senate runoff elections, Democratic Party members Raphael Warnock and Jon Ossoff received more votes than Republicans David Perdue and Kelly Loeffler. As a result, Democrats will hold 51 out of 100 seats in the Senate, giving them control of the upper chamber of Congress. The Democratic Party already holds a majority in the House of Representatives, the lower chamber. This means Democrats will control both legislative bodies.

On December 4, 2020, the House of Representatives approved a bill to legalize recreational marijuana at the federal level and sent it to the Senate for consideration. The bill includes:

• Removing THC from the list of controlled substances
• Granting amnesty to those convicted of marijuana-related offenses
• Creating a trust fund to finance the rehabilitation of former inmates

Democrats supported the bill, but Republicans opposed it, arguing that lifting the ban on marijuana would increase cannabinoid consumption and threaten public safety. At the time, the Republican Party controlled the Senate, so political analysts were confident the reform would fail.

However, after Warnock and Ossoff’s victory, the situation changed dramatically. With the Senate now under Democratic control, the chances of passing legalization legislation have significantly increased. Additionally, on January 20, Democrat Joe Biden will officially become President of the United States, and his running mate Kamala Harris will become Vice President. During her campaign, Harris promised to decriminalize marijuana if Biden won the presidency. Considering all these factors, American marijuana enthusiasts can at least expect the elimination of criminal penalties for marijuana possession.

Marijuana Producers Receive Additional Funding

In the past 24 hours, the Marijuana Index, which tracks the stock prices of major American and Canadian cannabis companies, rose by 7.3% (13.97 points). Shares of leading cannabis industry players saw significant price increases. For example, shares of U.S. companies Curaleaf Holdings and Trulieve Cannabis rose by 8% and 34%, respectively, in just 24 hours. Shares of Canadian cannabis giants Canopy Growth and Aurora Cannabis jumped by 12% and 6%, respectively. Moreover, since December 31, Canopy Growth’s stock price has increased by 22%.

On January 6, due to a strong surge in stock prices, the total market capitalization of 239 cannabis companies increased by $7 billion (10%). At the same time, trading volume for cannabis industry stocks on the NYSE rose by 53% to $1.9 billion. On the Nasdaq, trading volume increased by 25% to $926 million.