It’s happening. No, really. It’s happening. What was once deemed an impossible concession by cannabis activists has become a reality as President Joe Biden announced a surprising move to pardon people convicted of marijuana possession charges. And that’s not all. In the same speech, the 46th President stated: “I am asking the Secretary of Health and Human Services and the Attorney General to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.” This is crucial to note, as it could set the path toward legalization. 

How Did the Industry React?

Unsurprisingly, this was welcoming news for the cannabis sector. Individual stocks like Tilray appreciated by as much as 30%, while Canopy rose more than 20%. Industry insiders are speculating Biden’s decision might eventually pave the path toward a more holistic approach to how the government classifies marijuana, with hopes of eventual legalization. The CEO of StateHouse Holdings Inc, a California-based cannabis company stated:

“We are, first of all, delighted that the President is pardoning the many thousands of people whose lives have been horribly impacted by minor possession offenses. Secondly, we believe that re-scheduling, or outright de-scheduling, of cannabis would be a very positive catalyst for the legal industry.”

Some profess this move is long overdue. Karan Wadhera, managing partner at Casa Verde Capital who sits on the board of ten cannabis firms expressed: “This is massive. Both for the industry and obviously from a social equity perspective. People have been waiting for this ever since Biden took office.”

Marijuana Industry Outlook 

The future looks bright for this multi-billion dollar industry. Its projected growth rate in terms of CAGR (compound annual growth rate) is 28% -- not too shabby! Furthermore, the market as a whole is projected to increase to an astounding 97 billion between now and 2026. 

Aside from the plant’s use as a recreational drug, marijuana has also been used to treat various medical conditions and symptoms including pain relief, muscle spasms, inflammation and insomnia. In recent years, cannabis has also been associated with its ability to treat post-traumatic stress disorder and anxiety. If policymakers continue to soften their stance, the industry could stand to benefit tremendously in the years to come, both in terms of recreation and therapeutic use. 

It is important to consider the inherent risks this nascent industry brings, including the possibility of extreme volatility - and potentially losing your initial investment - given the highly speculative and politically sensitive nature of this investment space. However, for investors seeking exposure to the cannabis industry the following funds may be of interest:   

HMUS – (Horizons US Marijuana Index ETF)

• AUM: $11.1 M 
• Expense Ratio: 0.35%
• 1-Month Performance: -6.53%
• 3-Month Performance: -10.44%

HMJU – (Horizons BetaPro Marijuana Companies 2x Daily Bull ETF) 

• AUM: $2.4M 
• Total Expense Ratio: 2.05%
• 1-Month Performance: -26.87%
• 3-Month Performance: -33.44%

HMMJ – (Horizons Marijuana Life Sciences Index ETF) 

• AUM: $131.9 M 
• Expense Ratio: 0.85%
• 1-Month Performance: -3.81%
• 3-Month Performance: -8.19%

Final takeaway 

At this juncture, putting your money on marijuana is a high-risk, high-reward investment. At present, marijuana is still deemed as a Schedule 1 substance and there is no guarantee that it will change. Although President Biden’s pardons are welcome news, the decision as to whether or not there is a path forward for decriminalization, and eventually full legalization, is anyone’s guess right now. 

Data as of October 18, 2022.

Disclaimer: This article is limited to the dissemination of general information pertaining to investment strategies and financial planning and does not constitute an offer to issue or sell, or a solicitation of an offer to subscribe, buy, or acquire an interest in, any securities, financial instruments or other services, nor does it constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment.