Why is everyone talking about ASX cannabis shares all of a sudden?

Recent news out of the US may rekindle investor interest in cannabis stocks.

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An older farmer wearing a checkered shirt and a straw hat stands in a green field of cannabis plants growing up to waist level as he smiles while thinking about the outlook for ASX cannabis shares in FY23

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Key points

  • Cannabis stocks got a huge lift in the US last week
  • US president Joe Biden will pardon anyone previously convicted of simple marijuana possession under federal law
  • Biden is pressing to legalise cannabis in the US on a federal level

ASX cannabis shares have leapt back onto investor radars and are likely to grab more media headlines in the weeks ahead.

While all three are deep in the red today amid wider selling action that sees the All Ordinaries Index (ASX: XAO) down 1.4%, that extra attention could offer some tailwinds for cannabis stocks like Cann Group Ltd (ASX: CAN), Incannex Healthcare Ltd (ASX: IHL) and Creso Pharma Ltd (ASX: CPH).

Though if you're looking for information about ASX cannabis share Creso Pharma in the future, you may need to look up Melodiol Global Health Limited instead.

In a release this morning, Creso management announced their intention to seek shareholder approval for rebranding the company name at a future general meeting. Management said the new name represented "the global ambitions of the organisation".

So, why are ASX cannabis shares moving back into the spotlight?

How Biden could rekindle ASX cannabis shares

Since cannabis shares first began trading on the ASX and international exchanges, moves by US state governments and the vacillating prospects for legalisation by the federal government have alternately pushed them higher and lower.

Numerous US states have legalised medicinal and recreational marijuana in recent years. But cannabis has remained classified as a Schedule I substance under the federal Controlled Substances Act. That defines it as having a high potential for abuse, with no currently accepted medical applications.

But US president Joe Biden is following through with an election promise. Biden has said he will pardon everyone convicted of simple marijuana possession under federal law.

Here's what the president tweeted on Friday:

As I've said before, no one should be in jail just for using or possessing marijuana. Today, I'm taking steps to end our failed approach. Allow me to lay them out.

First: I'm pardoning all prior federal offenses of simple marijuana possession… Second: I'm calling on governors to pardon simple state marijuana possession offenses. Just as no one should be in a federal prison solely for possessing marijuana, no one should be in a local jail or state prison for that reason, either.

Biden also called on the US Attorney General "to initiate the process of reviewing how marijuana is scheduled under federal law". He noted it was currently classified "at the same level as heroin – and more serious than fentanyl. It makes no sense."

This US pot ETF surged on the news

While ASX cannabis shares aren't moving higher on Biden's legalisation push today, marijuana-focused exchange-traded fund (EFT) AdvisorShares Pure US Cannabis ETF (NYSEARCA: MSOS) leapt 41% higher in 30 minutes after the word hit the wires last week.

Though investors should take note that even if the US legalises marijuana on a federal level, not every cannabis share trading on the ASX will benefit. But companies with a significant footprint in US markets or the ability to expand into those markets, like Creso, could find some new opportunities ahead.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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