While much of the attention from Tuesday evening's midterm election focused on the balance of power in Congress, investors were instead focusing on ballot initiatives to legalize recreational marijuana in Michigan and North Dakota, while allowing the drug for medical use in Utah and Missouri.
Michigans Proposal 1 passed with 57 per cent of the vote, meaning recreational cannabis use and possession will be legal in the Wolverine State as soon as the results are certified in as little as 10 days. Once certification is complete, Michigan lawmakers will have one year to establish a regulatory framework for the recreational market. The value of Michigans cannabis market is expected to nearly double over the next five years from US$856-million in 2018 (for medicinal and potentially up to a month of recreational) to roughly US$1.3-billion in 2022, according to Canaccord Genuity analyst Bobby Burleson. California-based cannabis retail chain MedMen, which went public on the Canadian Securities Exchange in May, gained direct exposure to the Michigan market when it agreed to buy PharmaCann, which has a Michigan presence, in a US$682-million stock-based deal last month.
Both of the medical initiatives passed, as did Michigan's, but voters in North Dakota decided to reject its recreational marijuana use. But the three other states going ahead mean that 33 U.S. states plus the District of Columbia currently allow for legal marijuana use under some circumstances — either medically or recreationally.
Video: 3 states pass marijuana legislation in midterm elections
"Marijuana has now been legalized for adult use in one out of every five states, so I think it's safe to say federal laws are in need of an update," said Matthew Schweich, deputy director of the Marijuana Policy Project advocacy group.
Cannabis stocks posted dramatic gains after pro-legalization results in the midterms and the resignation of Mr. Sessions. Shares of Nanaimo, B.C.-based Tilray closed more than 30 per cent higher on the Nasdaq in New York while Smiths Falls, Ont.-based Canopy Growths New York listing gained nearly 8.3 per cent as of Wednesdays close. In Canadian markets, shares of MedMen gained 6.3 per cent on the Canadian Securities Exchange while shares of Edmonton-based Aurora Cannabis gained nearly 9 per cent on the Toronto Stock Exchange.
Investors clearly thought the same thing, as shares in Canopy Growth Corp., Aurora Cannabis Inc. and Aphria Inc. rose by eight per cent, nine per cent and four per cent, respectively. Nanaimo, B.C.-based Tilray Inc., which trades its shares on the Nasdaq exchange in New York, closed up by more than 28 per cent.
Late in the day Wednesday, all those pot stocks were pushed even higher by the resignation of U.S. Attorney General Jeff Sessions, one of the most virulently anti-cannabis politicians in the country.
"If the House flips to Democrats as is expected and Jeff Sessions resigns after the elections, that gives more psychological impetus for pro-cannabis legislation to pass," said Chris Damas, editor of investment newsletter the BCMI Report, before Sessions stepped down.
Analyst David Kideckel at Altacorp Capital, who covers cannabis companies, viewed Tuesday's election results as mildly positive for the sector as a whole.
"We see these states' push towards some form of cannabis legalization, whether recreational or medical, as one further catalyst towards U.S. policy change at a federal level, which we expect to happen over time."
The Democrats taking control of the House is also broadly supportive of marijuana over the long term, but likely not enough to lead to any firm steps on the federal level as long as the status quo persists.
More realistically, Mr. Linn expects the legalization process will take until the end of the decade, with Illinois beginning recreational sales closer to mid-2020. However, Mr. Linn also noted the passing of Tuesdays ballot measure in neighbouring Michigan could light a fire under Illinois lawmakers to move quickly, as many state residents will soon be able to drive a short distance to acquire marijuana products.
Damas says while he still thinks some of the big Canadian names listed above are overhyped, he has been advising clients to move money into some of the smaller U.S. companies with presences in multiple states
We could see some legislation move very quickly early next spring, said Dan Linn, executive director of the Illinois chapter of the U.S. National Organization for the Reform of Marijuana Laws. If everything goes as well as it possibly could, and we get a bill on the governors desk in the spring that has immediate effect, we could see sales start as soon as next summer.
Michigan opting for recreational weed was significant because of its large population, but ballot measures in North Dakota and Missouri were less important.
Utah opting for medical weed, however, was of note simply because it shares a border with Colorado, the U.S. state where the cannabis sector is flourishing the most.
"I believe Colorado's huge cannabis growth has been in part because it has been an island surrounded by prohibitionist states," he said.
He says the Democrats taking control of the House of Representatives is a positive sign for cannabis over the long term, but he says it's not a given that legal pot in the U.S. would be a boon for Canadian companies like the ones listed above.
A worker waters cannabis plants at a facility in Lincoln, Ont. Many cannabis companies posted sharp stock increases on Wednesday in response to pro-legalization results in the midterms.
Instead, he thinks some of the lesser U.S. companies have the most to gain. "The U.S. players will soon have as much market capitalization as the Canadian companies or more," he said. "These are Barbarians at the cannabis gate in my view," adding that he thinks it's more likely in the long run that U.S. cannabis names will one day try to take over the big Canadian players than the opposite happening.
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"Do the Canadian operators risk missing the train in U.S. federally legal cannabis the longer it is delayed?" Damas said. "I would say, yes."
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Voters opted to legalize marijuana in Michigan, protect transgender rights in Massachusetts and restore voting rights to over one million ex-felons in Florida, in a series of ballot questions posed during the U.S. midterm elections.
In all, 155 statewide initiatives were on the ballot across 37 states on Tuesday. Most were drafted by state legislatures, but 64 resulted from citizen-initiated campaigns, including many of the most eye-catching proposals.
Michigan voters made their state the first in the Midwest to legalize recreational marijuana by passing a ballot measure that will allow people 21 or older to buy and use the drug. A similar measure was defeated in North Dakota, meaning there are now 10 states that allow recreational use of pot. Missouri became the 31st state to approve the medical use of marijuana, while Utah was considering that step.
Western and northeastern states have led the way on legalizing marijuana, but the victory in Michigan powerfully demonstrates the national reach of this movement, said Maria McFarland Sanchez-Moreno, executive director of the Drug Policy Alliance. Sanchez-Moreno also questioned how long the federal government could resist the legalization wave.
In the first statewide referendum on transgender rights, Massachusetts voters on Tuesday beat back a repeal attempt and reaffirmed a 2016 law extending nondiscrimination protections to transgender people, including their use of public bathrooms and locker rooms.
The outcome in Massachusetts was a huge relief to LGBT-rights activists, who feared that a vote to repeal the 2016 law would prompt a wave of similar efforts to roll back protections in other states. Already, some protections at the federal level are under threat from U.S. President Donald Trumps administration.
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When transgender rights are being threatened nationally, we absolutely must preserve the rights we have secured at the state level, said Carol Rose, executive director of the American Civil Liberties Union of Massachusetts.
Civil-rights activists scored a major victory in Florida, where voters approved a ballot measure that will enable more than one million ex-felons to regain their voting rights. That could alter the future election landscape in the nations most populous swing state.
With the vote in Florida, most felons will automatically have their voting rights restored when they complete their sentences or go on probation. The amendment exempts those convicted of sex offenses and murder.
Supporters said the states current system was too onerous. It required felons to wait at least five years after completing their sentence before they could file a request with the governor and cabinet. About 1.5 million people are affected. Nearly all states allow felons to vote after completing their sentences.
Howard Simon, executive director of the American Civil Liberties Unions Florida affiliate, said the result would remove an ugly stain from the state constitution.
For too long, Florida has been an extreme outlier — our states lifetime voting ban was the single most powerful voter suppression tactic in the country, he said.
Floridians also approved a measure aimed at phasing out greyhound racing in the state, the last stronghold of the sport in the U.S.
The greyhound measure will ban betting on greyhound races starting in 2021. The sport remains active in five other states, but may be too small-scale to survive.
Proponents said racing is inherently cruel, pointing to the average of two deaths weekly from illness or injury among Floridas 8,000 racing dogs.
A minimum wage increase was approved in two states. An Arkansas measure will raise the wage from $8.50 an hour to $11 by 2021; Missouris will gradually raise the $7.85 minimum wage to $12 an hour.
While liberal-leaning groups succeeded in getting some of their favoured policy proposals on the ballot in Republican-controlled states, the partisan pattern was reversed in a few states.
In Democratic-leaning Oregon, conservatives unsuccessfully targeted two policies. Voters there upheld a law allowing the use of state money to pay for low-income women to have abortions, and also reaffirmed a sanctuary state law forbidding law enforcement agencies from using state resources or personnel to arrest people whose only crime is being in the U.S. illegally.
Climate change was an issue in Arizona, where voters defeated a measure that would have required 50 per cent of electricity to come from renewable sources by 2030. Colorado voters rejected a measure that could have sharply reduced oil and gas drilling, including the method known as fracking, by requiring new oil and gas wells to be farther from occupied buildings than allowed under current law.
Proposals to change the redistricting process so its potentially less partisan were approved in Missouri, Colorado and Michigan. A similar proposal was on the ballot in Utah.
Medicaid expansion was another multi-state topic, on the ballot because Republican-led legislatures refused to take advantage of expanded coverage offered under President Barack Obamas health care law. Nebraska and Idaho voters approved measures to expand Medicaid health coverage to tens of thousands of low-income residents.