Why Investors Were so High on Cronos Stock This Week


What happened

Like a puff of marijuana smoke dreamily floating skyward, Cronos Group (CRON -3.90%) stock was rising over the past few trading sessions. According to data compiled by S&P Global Market Intelligence, as of late Thursday morning, the Canadian cannabis company’s share price was up by more than 21%. Good news from the country’s massive neighbor to the south was the catalyst for the jump. 

So what

In contrast to Canada, which underwent full and complete marijuana legalization at the Federal level in 2018, U.S. legalization has been patchy and hesitant. That’s largely because the Federal agency tasked with policing illegal substances, the Drug Enforcement Agency (DEA), has classified marijuana as a Schedule I drug. That means it’s classified as a substance with no medicinal value and carrying signficant risk of abuse.

While places like California and New York have been able to get around this by changing state law unilaterally, weed is still technically illegal at the Federal level due to this classification.

But suddenly, there’s some movement in the halls of power. On Wednesday, an unnamed top official at the Department of Health and Human Services (HHS) sent a letter to the DEA requesting that it reclassify cannabis.

Currently, according to the DEA’s classification system that places drugs in several “Schedules,” marijuana falls in Schedule I — home to what’s considered to be the most dangerous drugs. HHS would like it to be moved to Schedule III, which in the DEA’s definition means it would have only “a moderate to low potential for physical and psychological dependence.”

Now what

The DEA has promised to launch a formal review of the request. This dramatically increases the chances of de facto legalization occurring on the Federal level. If and when that occurs, a wide-open U.S. market for recreational marijuana would benefit nearly every company on the North American pot scene.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.



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