MW Trump AG pick Gaetz could be great for cannabis - but stock moves suggest confirmation is unlikely
By Victor Reklaitis and Steve Gelsi
Cannabis stocks are dropping into the red, as the Senate isn't expected to confirm Matt Gaetz as attorney general
President-elect Donald Trump's decision to nominate controversial Republican Matt Gaetz for the post of attorney general has stunned GOP senators, leading to expectations that Gaetz won't actually get confirmed by the U.S. Senate for the job.
But if Gaetz does manage to win confirmation, his tenure at the Justice Department is expected to be positive for the cannabis industry MSOS.
"This is positive for cannabis as Gaetz has been one of the more vocal cannabis legalization backers in the House GOP. This should take off the table the risk that a Trump Attorney General attacks legalization at the state level by asserting federal authority," Jaret Seiberg, an analyst at TD Cowen Washington Research Group, said in a note.
Seiberg added, however: "We believe Gaetz may have trouble winning confirmation as Attorney General even with a 53 to 47 GOP majority in the Senate."
One betting market, Polymarket, was giving Gaetz just a 36% chance of winning confirmation.
Cannabis stocks reflected this pessimism on Thursday, the first trading day after Trump said he was nominating Gaetz.
The AdvisorShares Pure U.S. Cannabis exchange-traded fund MSOS fell 2.8%, while individual stocks of U.S cannabis companies also moved into the red.
Verano Holdings Corp.'s stock (VRNOF) dropped about 9% and Ayr Wellness Inc.'s (AYRWF) declined by 5.2%, while Green Thumb Industries Inc. (GTBIF) subtracted about 2.7% and Trulieve Cannabis Corp. (TCNNF) moved lower by 4.7%.
Not all cannabis stocks, fell, however: Curaleaf Holdings Inc. (CURLF) rose 1.4% and Canopy Growth Corp. $(CGC.AU)$ rose 1.1%.
Still, if Gaetz should be confirmed, cannabis backers would see it as a positive, since the new attorney general would head up an effort set in motion by the Biden administration to lower the federal classification of cannabis to the less restrictive level of Schedule III. Its current classification as a Schedule I drug puts it in the same category as heroin and LSD.
Also read: Cannabis stocks rally after Trump supports moving drug to less restrictive category
David Culver, senior vice president of public affairs for the pro-cannabis U.S Cannabis Council, said Gaetz ranks as "one of the most pro-cannabis Republicans on Capitol Hill."
Nominating him as U.S. attorney general signals Trump's "commitment to make good on his campaign promises around cannabis reform," Culver said.
Gaetz resigned from his House seat representing Florida on Wednesday evening following his nomination, effectively ending an ethics probe by a House committee into allegations including sexual misconduct and drug use.
His selection by Trump has sparked speculation that the president-elect is putting forward controversial picks in order to force GOP senators to confirm other choices in exchange for taking a stand against Gaetz.
In 2022, Gaetz was one of only three Republicans to vote in favor of the Marijuana Opportunity Reinvestment and Expungement Act, also known as the MORE Act, which would have decriminalized cannabis on the federal level.
The bill passed the U.S. House of Representatives by a vote of 220-204 but died in the U.S. Senate.
Meanwhile, versions of the Safer Banking bill, which would open up the financial system to legal-cannabis companies, have passed in the House seven times in the past decade, but none has yet come to a full vote in the Senate.
If confirmed as attorney general, Gaetz would likely keep the federal government from meddling in states with medical and adult-use cannabis plans.
That would be a departure from Trump's first attorney general, Jeff Sessions, who in 2018 chilled the cannabis sector by rescinding the Cole Memo, which protected state-legal cannabis businesses from federal interference.
While Gaetz favored the establishment of a medical-cannabis program in Florida in 2014, he said during this year's election that he would not vote in favor of a statewide ballot initiative that would have allowed sales of pot to adults over 21.
The measure, known as Amendment 3, failed to win the 60% vote required to change the state's constitution.
"I think when you ensconce abortion policy or marijuana policy in the constitution, you limit the ability to appropriately tailor policy to evolving circumstances and evolving technologies," Gaetz said, as reported by FloridaPolitics.com.
While Democrats tend to voice stronger support for legalization of cannabis, a majority of Republicans are also in favor of it. At last check, a Gallup poll found 70% support in the U.S. for legalization.
-Victor Reklaitis -Steve Gelsi
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November 14, 2024 14:46 ET (19:46 GMT)
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