Marijuana stocks spiked following President Joe Biden's announcement that he would pardon those convicted of simple marijuana possession at a federal level.
However, BofA Securities' analysts Lisa K. Lewandowski and Bryan D. Spillane are recommending that investors not deposit their capital in cannabis equity just yet.
"As an investment opportunity, we view cannabis as early cycle, with potential for years of legal industry sales growth ahead, catalyzed by the opening of new legal markets and growth in existing ones," they said in a recent note.
Who Holds The Key To Unlock Development In The Marijuana Industry?
Federal cannabis legalization is the key to developing the US cannabis industry, they said.
According to Congressional Research Service, those holding the key happen to be members of Congress and the administration.
While Biden has put the U.S. Department of Health & Human Services/the U.S. and Department Of Justice in charge of launching a review of marijuana's status as a Schedule 1 substance, it seems that he won't be taking any further steps regarding the issue.
"It does not appear that the president could directly de/re-schedule by executive order," the analysts said.
So far, Congress members have debated both re-scheduling and de-scheduling on several occasions. The analysts pointed out that the main major stumbling block to any progress would be cannabis remaining a "controlled substance at any level under the CSA."
Out of 74 marijuana-related measures in both chambers, the SAFE (Secure and Fair Enforcement) Banking Act would likely be reviewed once again after the midterms. Either way, the Senate's composition following the elections will set the pace for reform legislation being placed on the floor for a vote.
HHS To Review Marijuana Scheduling 'As Quickly As Possible'
Interestingly, HHS Secretary Xavier Becerra said Friday that the agency is ready to review cannabis' status as a Schedule I substance.
"The president was very clear—he wants this done as quickly as possible," Becerra said. "It's not new science, but there's a lot of information to gather because, in many states, marijuana has been legalized for either medical purposes or recreational purposes."
He added that the Food and Drug Administration will review the plant's federal scheduling status and assess eight factors, such as marijuana's actual or relative potential for abuse and other issues, before making a recommendation.
Becerra, who was in Florida to discuss Medicare pricing, has already addressed the issue with FDA Commissioner Robert Califf.
Meanwhile, the DEA will conduct its review separately.
"If there is evidence that a change is warranted, then the DEA would begin the rulemaking process," the analysts said.
The duo also highlighted other cannabis issues that US lawmakers need to revisit, including settling conflicts between federal and state laws, criminal justice reform, access to cannabis for veterans and cannabis banking reform, to name a few.
What Are The Benefits Of Rec Marijuana Legalization
Lastly, the analysts shed light on why legalization of recreational cannabis benefits jurisdictions, naming social justice, elimination of illicit markets, tax revenue and enforcement costs, among others.
Meanwhile, a new report from the Federal Reserve Bank highlighted the economic impact marijuana legalization has had in recent years. Policy changes on the state level have resulted in increased commercial real estate demand and a surge in tax revenues while creating more jobs.
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