For the past nine months, tech stocks have been all the rage. But while tech has Wall Street’s attention, marijuana stocks have been quietly outperforming…
According to a recent report from New Frontier Data, the legal U.S. cannabis industry is expected to grow by a compound annual rate of 21% between 2019 and 2025. That will push legal weed sales from $13.2 billion in 2019 to an estimated $41.5 billion by mid-decade. This is a fast-growing industry with overwhelming support for legalization from the public, which is what makes it such an intriguing investment opportunity.
Every year brings change to the cannabis industry. As we ready to move into 2021, expect the following four trends to dominate the marijuana space.
1. The push for cannabis banking reform
In November, the pot industry let out a collective cheer when Democratic Party challenger Joe Biden defeated incumbent Republican Donald Trump for the presidency. Although Trump has maintained a hands-off approach to state-level marijuana regulation, both of his attorneys general (Jeff Sessions and William Barr) were unabashedly anti-cannabis. Trump himself has shied away from the legalization debate.
On the campaign trail, Biden pledged to decriminalize marijuana at the federal level and reschedule the drug from Schedule I to Schedule II. Though this wouldn’t legalize cannabis at the federal level, it would remove many of the penalties associated with marijuana use.
What’ll be far more interesting is if progress is made on cannabis banking reform. The Democrat-led House has previously introduced legislation designed to allow banks and credit unions to provide basic financial services to pot companies in legalized states without the fear of a federal penalty. Momentum certainly seems to favor banking reform, but much will depend on whether Republican Senate Majority Leader Mitch McConnell allows such a bill to reach the upper house’s floor for a vote.
The fight for banking reform is especially noteworthy for marijuana real estate investment trust Innovative Industrial Properties (NYSE:IIPR). Innovative Industrial’s sale-leaseback program has been a critical growth tool for the company that cannabis banking reform would probably weaken.
2. State-level legalizations
Even though it’s an off year for elections, 2021 could see a handful of states move to legalize medical or recreational marijuana. On Dec. 28, I laid out my thinking on three states that looked poised to legalize in the upcoming year.
New York probably has the highest probability of legalizing adult-use weed in 2021 of any state. The Empire State’s Legislature came very close to doing so in 2019. Legalization would likely have come in 2020 had the coronavirus disease 2019 (COVID-19) not hit New York so hard. With big budget gaps to fill, New York legislators might get to business on legalizing recreational pot early in 2021.
The neighboring state of…
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