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Will Royal College of Psychologists Review of Cannabis Position Accelerate Legalisation?

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Investing online in legal cannabis stocks, or ‘pot stocks’, is very much in vogue as the wave of international legalisation gathers pace. Aurora, the Edmonton-based Canadian cannabis cultivation and distribution company that will add a NYSE listing to its current place on the Toronto Stock Exchange at the end of this month has rocketed up almost 70% in the past month. Cannabis Growth, the biggest company in the sector is up just under 70% in three months.

The most popular ETFs that offer broad exposure to the legal cannabis industry have also been surging. The ETFMG Alternative Harvest exchange-traded fund is up 13% over the last month and the Horizons Marijuana Life Sciences Index ETF is up over 61% since its mid-August market capitalisation despite a recent correction.

Cannabis legalisation falls into two major categories – medical use and recreational use. Legalisation of the drug for medical use is moving fastest as clinical evidence of its properties in the treatment of illnesses and conditions from some cancers to chronic pain and even depression mounts. Medical use of cannabis is legal in 31 U.S. states and many European, Latin American and other international countries.

The UK government has recently bowed to pressure to reform and now allows medical cannabis use on prescription. An announcement yesterday that the Royal College of Psychologists will launch a review of its official position opposing legalisation of the drug will raise hopes among British investors and supporters of legalisation. Should the review result in the College withdrawing its opposition to legalisation, it could be an important step towards further liberalisation of legislation around cannabis use within a medical and recreational context.

The Royal College’s registrar, Dr Adrian James, has informed that a review panel will be set up to examine evidence on recreational use in territories where it has already been decriminalised or legalised, such as U.S. states, Canada, Uruguay and Portugal. The College has previously maintained that regular overuse of cannabis, particularly stronger strains, can lead to mental health issues.

The panel will open its investigation into the evidence put before it with an ‘open mind’ and will take into consideration practicalities such as how legalisation helps control the strength of the drug being sold and consumed. It will also consider how widespread access already is despite illegality and the positive impact legalisation could have in terms of tax revenue and easing the burden on the criminal justice system.

Eventual changes to the legal status of cannabis in the UK could lead to domestic companies in the sector listing on the London Stock Exchange. UK biotech company GW Pharmaceuticals, whose cannabis-based MS treatment was the first to be approved in any country, chose to list in the U.S. at least partly due to the more tolerant state-level legislative environment around cannabis meaning greater investor enthusiasm. Those investing online can still access the bigger ETFs and cannabis stocks listed in Canada and the U.S. through most major UK online stock brokers. However, some caution and careful research should be urged. The extent to which pot stocks have shot up in value in recent months on international legalisation developments may be ahead of the actual market, with some analysts fearing the forming of a sector ‘bubble’.

Risk Warning:

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Paul

The author Paul