Marijuana: Where Congress stands on cannabis legalization, reform efforts

POLITICO Reporter Natalie Fertig joins Yahoo Finance Live to discuss the recent increase in cannabis stocks as well as where Congress stands on cannabis legalization.

Video Transcript

JULIE HYMAN: And I noticing that among the top trending tickers on Yahoo Finance this morning as well as late yesterday-- cannabis stocks-- and they are rising. On a report that there is going to be a vote next week in the House on a marijuana legalization act, but what does that mean exactly does that mean?

We are getting a step closer to federal legalization. The stocks seem to be trading that way, but is that actually what's happening? Natalie Fertig is joining us now. She is the federal cannabis policy reporter for Politico. So Natalie, what is this they're set to vote on next week, and what does it mean?

NATALIE FERTIG: So the bill they're voting on next week is the House's decriminalization bill, the More Act. And it passed already in December of 2020. So when people are looking at this bill and saying, wow, this is an exciting new move.

It's interesting that the House is passing this again-- that is a big step. But ultimately, what we're all looking at is the Senate. The Senate never took this bill up last year. Majority Leader Chuck Schumer has said that he has a bill that he is planning to propose. He said that he hopes to propose it in April.

But my colleague and I went around and asked a large number of those senators that are in the middle on both sides-- the ones that could swing either way. And there are not enough Democrats right now to vote on the concept of cannabis D scheduling in the Senate, and Schumer would need to hit 60.

So he would not only need to get all of those Democrats, but he would need to get some Republicans on board as well. So the idea that the More Act passing in the House is going to dramatically change the outlook for this concept in the Senate, I would not say that is true.

BRIAN SOZZI: Natalie, isn't this somewhat-- or should be somewhat of a no-brainer here for legislators? Isn't this a great way to raise additional tax revenue at a time when that is clearly needed?

NATALIE FERTIG: Well, one thing I will point out is that you know the CBO report came out last year on the More Act and it did find that there would be additional tax revenue for if cannabis was legalized. But you have to remember that right now cannabis businesses actually pay very, very high taxes in the United States because they do not get to write off any business expenses.

And that's because of a tax-- a line called 280E, which if you talk to people in the cannabis industry, they will mention it all the time. So they're-- the federal government is already getting a lot of taxes from legal cannabis businesses. And those can continue to be legalized on the state level.

We're at 18 states right now with recreational marijuana, plus the District of Columbia, and two territories. There's 36, maybe 37 states that have medical. So states can do this without the federal government. So you have to think, the taxation is not the number one motivation here.

But I would agree with you that, yes, there is a really high polling for cannabis even amongst Republicans. 49 or 50 percent of Republican voters support D scheduling, or removing the federal prohibitions on cannabis.

Where that goes afterwards though, with expungement, and creating social equity programs, that's where things get a bit more complicated on Capitol Hill. That's where Republicans and Democrats split.

And you also have to remember that Capitol Hill tends to be an older portion of America. And there is definitely a big generational gap in support for cannabis laws. So a lot of the lawmakers on Capitol Hill were lawmakers during the Reagan era of saying, don't say no-- to or just say no to drugs.

Whereas, some of the younger lawmakers coming in, we see Republicans like South Carolina Representative Nancy Mace, who has proposed her own decriminalization bill. And she's a younger Republican lawmaker. So it's just going to take Congress longer to get around to where the rest of the American public are.

JULIE HYMAN: Yeah, it's difficult to imagine Nancy Pelosi and McConnell sparking one up on Capitol Hill or having that context. And the view that federal legalization is not going to happen imminently, seems to be the view in the industry.

At the same time, the outlook for the Safe Banking Act seems to be a little bit more positive. That is legalizing the financial system around cannabis, even if there is not a federal legalization. What's the the prognosis there?

NATALIE FERTIG: To be completely honest, I think that it's also stalled in the Senate. Majority Leader Schumer really wants to move his Broad Bill before moving any type of banking-- well, banking would be technically encompassed within that.

But there is a growing-- in 2020 we saw cannabis become much more closely linked to criminal justice reform. And Breonna Taylor was shot while police were exercising on a drug warrant. A no knock warrant is a drug related warrant.

And so cannabis legalization and criminal justice reform have become much more tightly combined both in the public eye, and amongst Democrats, and on Capitol Hill. And so doing something-- this is the phrase that is regularly used-- is that doing something that helps a predominantly White industry make more money while a majority Black population continues to sit in jail for doing these same activity, is a nonstarter.

For lawmakers like Chuck Schumer and like Senator Cory Booker, are the two predominant people that are saying, no let's not do banking, let's do comprehensive reform. The one chink in that armor might be representative Ed Perlmutter in the House because he sits on the powerful House Rules Committee. And he has the power to introduce an Amendment in the last hour-- the last minute of any bill.

So he has the power to do that. And the Safe Banking Act is his bill. And he has made it his mission to get it passed this year. So there are some ways that he could twist the Senate's arm into doing that. They would all be pretty dramatic, but it leaves a small window open.

JULIE HYMAN: All right Natalie, thank you so much. Really appreciate your time here this morning and laying this out for us. And also very helpful to cannabis investors who are bidding up the stocks here this morning.