We may earn commissions if you use the recommended services on this site.  

Cannabis Exchange-Traded Funds (ETFs) Experience Rapid Growth Amid HHS Recommendation to Loosen Restrictions, Fuelling Optimism for Federal Reform

Latest Business News

Cannabis ETFs Thrive as HHS Recommendation Boosts Hope for Federal Reform

The cannabis sector is experiencing a surge in September as investors regain interest following a period of waning enthusiasm. This upswing in marijuana-related Exchange-Traded Funds (ETFs) can be attributed to the recent recommendation by the U.S. Department of Health and Human Services (HHS) to ease restrictions on marijuana. The HHS review of its classification under the Controlled Substances Act has provided a swift turnaround for the industry, which has been hindered by the slow pace of federal reform. This spike in interest comes after several quarters of sluggish growth and even losses for some funds.

Impressive Performance of Cannabis ETFs

Notably, ETFMG Alternative Harvest (MJ) and AdvisorShares Pure US Cannabis (MSOS) have outperformed the Dow and S&P indexes by a significant margin this quarter. MJ and MSOS have seen gains of approximately 47% and 56%, respectively, while the Dow and S&P have only increased by about 0.5%. Analyst Matt Bottomley from Canaccord Genuity attributes this success to the impact of federal catalysts on the trading of cannabis stocks.

Positive Impact on Cannabis Companies

The HHS recommendation has also had a positive effect on individual cannabis companies, with shares of Canopy Growth, Tilray Brands, and Cronos Group experiencing an upswing. Despite the legalization of marijuana in 39 states for recreational or medical use, the industry has faced challenges due to the Schedule I classification and federal prohibition, which have limited access to financing and a broader market.

Potential for Federal Reform

The HHS recommendation, made under the direction of the Biden administration, has signaled to stakeholders that more substantial federal reform may be on the horizon. This includes potential changes such as the Secure and Fair Enforcement Banking Act (SAFE), a congressional bill that aims to enable banks to provide services to legal marijuana businesses. The current risk associated with banking institutions engaging with substances under the Controlled Substances Act could be alleviated if federal laws are amended.

Path to Federal Reform

The SAFE Banking Act is currently progressing through Congress, with a Senate Banking Committee vote expected soon. Additionally, the Drug Enforcement Agency (DEA) has initiated a review of marijuana's classification and will submit a proposal to the attorney general, who has the final say on potential reclassification. Analysts predict that as these processes unfold, institutional capital that previously remained hesitant may enter the cannabis space. However, the momentum of the sector will depend on timely updates from the DEA. If there is a lack of communication, the industry may experience a period of stagnation. In conclusion, the recent HHS recommendation to ease restrictions on marijuana has revitalized the cannabis sector and ignited hope for more comprehensive federal reform. The impressive performance of cannabis ETFs and the positive impact on individual companies indicate growing investor interest. The potential passage of the SAFE Banking Act and the ongoing DEA review further contribute to the optimistic outlook for the industry. However, continued progress and timely communication from regulatory bodies will be crucial in maintaining the sector's momentum.

Conclusion: Potential Impact on New Businesses

The recent surge in cannabis ETFs, driven by the HHS recommendation to ease marijuana restrictions, paints an optimistic picture for new businesses in the cannabis sector.

Opportunities for Growth and Innovation

The impressive performance of cannabis ETFs and the positive impact on individual companies signal a renewed investor interest. This presents an opportunity for new businesses to capitalize on the upswing, innovate, and secure their market position.

Regulatory Changes and Access to Financing

The potential for more substantial federal reform, including the passage of the SAFE Banking Act, could alleviate the current challenges faced by the cannabis industry. This could open up access to financing and a broader market for new businesses.

Importance of Timely Updates

However, the momentum of the sector is contingent on timely updates from regulatory bodies like the DEA. New businesses must stay informed and agile to navigate any potential periods of stagnation. In conclusion, while the HHS recommendation has revitalized the cannabis sector, new businesses must navigate the evolving landscape with agility and innovation. The potential for federal reform presents exciting opportunities, but the sector's momentum relies on continued progress and communication from regulatory bodies.
Story First Published at: https://www.cnbc.com/2023/09/12/cannabis-etfs-rise-after-hhs-recommendation-to-reschedule-marijuana.html
Brought to you by BusinessFormation.io
Know Your State's Registered Agent Requirements: What is a Registered Agent
Learn How To Create An LLC: What Is An LLC and How To Start an LLC Online

LLC Filing & Registered Agent Services

Compare Online LLC Filing Services Today

We work with the market leaders in business formation and registered agent services.

Getting started is simple and inexpensive. Form your business today & secure your brand name before someone beats you to it! Click below to view the Top 3 Best LLC and registered agent service providers.
View Top 3 Providers Now

Filing An LLC Can Be Complicated

Streamline Your LLC Filing Online for $39

Northwest Registered Agent is the best-rated service for first time filers.

Get professional LLC formation & registered agent services for only $39 + state filing fee. This offers includes your full LLC setup, plus a private business address, lifetime support, and more.

Trusted by Millions. Save 82% Today.