Cannabis: Why Is Massachusetts Opening Special Cafes? – Market Realist

Massachusetts legalized medical cannabis in 2012. Following the ballot initiative in November 2016, the state legalized adult-use or recreational cannabis in December 2016. However, cannabis consumption was prohibited in public places. If people couldn’t consume marijuana in their homes, they had few options left. However, the situation will change due to the Cannabis Control Commission’s approval on Tuesday.

Regulators approve cannabis cafes

On Tuesday, the Cannabis Control Commission approved the social consumption of cannabis. The commission also approved a home delivery service for cannabis.

The new regulation allows 12 communities in Massachusetts to have establishments where people above 21 years can consume marijuana. According to the press release, the pilot program will run for two years. During this period, the commission added that the licenses for these establishments will only be offered to microbusinesses, craft marijuana cooperatives, and applicants from the communities impacted by the war on drugs. However, the commission said that the pilot program can’t start until the legislature passes the law allowing municipalities to authorize social consumption in their communities.

Delivery service approval

The commission also approved a delivery service for cannabis. In the first two years, the delivery licenses will only be offered to applicants from the communities impacted by the war on drugs. Micro-businesses that have delivery endorsements from the commission can get the licenses. The delivery license holder has to acquire marijuana products from other licensed retailers. The commission set rules to avoid under-aged people getting access to cannabis products.

Cannabis sector has underperformed this year

So far, the cannabis sector has underperformed the broader equity market this year. The ETFMG Alternative Harvest ETF (MJ) and the Horizons Marijuana Life Sciences Index ETF (HMMJ) have fallen 11.4% and 8.9% YTD (year-to-date), respectively. However, the S&P 500 Index increased 19.1% during the same period. Increased operating losses and recent regulatory scandals dented investors’ confidence, which led to a fall in cannabis companies’ stock prices.

Major cannabis players’ performances

Cronos Group (CRON) has fallen 11.5% YTD. The company reported a higher-than-expected operating loss in the second quarter. During the earnings call, the company’s management announced that its operating expenses would rise in the second half of 2019. All of these factors caused the company’s stock price to fall. However, Cronos Group is getting ready for the second phase of legalization in Canada, also called “Cannabis 2.0.” Earlier this month, the company announced a two-year deal with MediPharm Labs. According to the agreement, MediPharm will fill and package Cronos Group’s vaporizer devices.

This year, Tilray (TLRY) has lost 62.3% of its stock values as of Wednesday. The company reported higher net losses in the first and second quarter, which caused the company’s stock price to fall. However, analysts are optimistic about the stock. Read Tilray: Are Analysts Optimistic about Its Stock? to learn more.

Canopy Growth (CGC) (WEED) missed analysts’ top and bottom-line estimates in the first quarter of fiscal 2020. The weak performance in the last two quarters caused the company’s stock price to fall. However, Canopy Growth is gearing up for the second phase of legalization in Canada. To learn more, read Canopy Growth: Getting Ready for Cannabis 2.0.

Cannabis legalization in the US

Although the cannabis sector has underperformed this year, we expect Cannabis 2.0 and marijuana legalization in more US states to boost the industry.

As of today, 33 states have legalized medical marijuana, while 11 states have legalized recreational marijuana. Other states, like South Dakota and Wisconsin, are also working to legalize medical cannabis. Yesterday, the House of Representatives passed the SAFE (Secure and Fair Enforcement) Banking Act of 2019. The act will allow financial institutions to conduct business with cannabis players. To learn more, read Marijuana Legalization: House Passes SAFE Act in the US.

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