New York moves a step closer to legalizing cannabis as assembly, senate and governor reach agreement

New York state appears closer to legalizing cannabis for adult recreational use, after Senate Finance Committee Chair Liz Krueger told Bloomberg the governor, assembly and senate have reached an agreement and that a final vote could take place “as soon as next week.” Cuomo had already pledged that 2021 would be the year the state would legalize and had included potential tax revenue in this year’s budget. With the state facing a $15 billion deficit due to the effects of the coronavirus pandemic, there were hopes cannabis taxes could contribute to bridging that gap. The news failed to light a fire under cannabis stocks and is not as favorable to those multi-state operators licensed to do business there based on initial repots, wrote Cantor Fitzgerald analyst Pablo Zuanic. A proposed exise tax of 13% on top of the state’s sales tax would make New York among the more heavily taxed states, which could offer a blow to legal companies and allow the black market to continue to thrive. “While not final, this “half good” NY program, delays in NJ, and the “back and forth” among Congressional Democrats regarding MJ reform (and also, apparently, between the White House and Congress), in our view, will continue to put a cloud over cannabis stocks (the group has been range-bound since peaking on 2/10),” Zuanic wrote in a note to clients. “The overall uncertainty makes us put even more emphasis on franchise strength (and reflect this in our price targets), so in the US our preferred cannabis stocks remain Curaleaf and Trulieve .” The Cannabis ETF was not active premarket but has gained 56% in the year to date, while the S&P 500 has gained 3.5%.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.