Shares of cannabis stocks pared earlier gains after surging in early trading Wednesday, as three U.S. states voted to loosen the use of recreational and medicinal marijuana amid growing optimism the country will soon pass measures to federally legalize pot.

With most polls reporting following Tuesday’s U.S. midterm elections, Michigan residents voted in favour of legalizing recreational cannabis for anyone 21 years old or older in the state, while voters in Missouri and Utah both approved ballot measures to allow the sale of medical marijuana. A ballot measure to legalize recreational use of cannabis in North Dakota failed.

Michigan would be the first U.S. Midwestern state and the second-largest behind California to allow its residents to purchase and consume recreational cannabis legally. The state’s cannabis market is estimated to be US$1.3 billion by 2022, according to Arcview Market Research.

The election results boosted U.S. and Canadian pot stocks with Tilray Inc. (TLRY.O) jumping 6.3 per cent in early Wednesday trading, while Aurora Cannabis Inc. (ACB.TO) was up 3.3 per cent and Canopy Growth Corp. (WEED.TO) advanced by 2.1 per cent. U.S. pot producers MedMen Enterprises Inc. (MMEN.CD), Curaleaf Inc. and iAnthus Capital Holdings Inc. (IAN.CD) all rose 5.3 per cent, 1.3 per cent, and 1.6 per cent, respectively.

With the Democrats winning a majority in the House of Representatives as well as several key governor races in some U.S. states, Connecticut, Illinois, New York, and Rhode Island are all on track to legalize cannabis in the future, which would add pressure to move federally on the issue, according to Vivien Azer, cannabis analyst at Cowan & Co.

“While we do not see a path forward in the Senate, the House is a different story. The GOP roadblocks to legislation are gone,” Azer wrote in a report published on Wednesday. “The House Democratic leader understands that these bills are dead on arrival in the Senate. Yet they will pass them to send a message to cannabis advocates.”

The Democrat win in the House also increases the likelihood of the Farm Bill or the STATES Act passing, which would permit Canadian pot producers to enter the U.S. market, according to BMO Capital Markets.

Reaction from U.S. pot company executives was mostly positive for a market that could be worth as much as $75 billion by 2030, according to an estimate from Cowen & Co.

“Utah is one of the reddest states in the country, and Senator Orrin Hatch is one of the most conservative guys out there. To pass this initiative and create a legal medical marijuana program in Utah, it’s as jarring as seeing Mother Teresa show up at a casino,” said Hadley Ford, chief executive officer at iAnthus Capital, in an email to BNN Bloomberg.

“It’s clear an overwhelming majority of Americans across both parties accept cannabis as a medical product, and we should expect to see some sort of program in every state now that Utah has come online.”

Khurram Malik, chief executive officer of Biome Grow Inc., a Canadian cannabis producer, said that the U.S. midterm results could see President Donald Trump pivot to a pro-cannabis agenda to win support from younger voting blocks that would typically only cast their ballots in presidential elections.

“The president doesn’t have an ideology beyond self-preservation and getting re-elected, and if the math makes sense, he may drop strong hints on the campaign trail that the legalization of recreational cannabis at the federal level will happen if he wins in 2020,” Malik said in an email to BNN Bloomberg.

“It will be based on an economic stimulus platform — particularly in the more economic-depressed regions where he is the strongest.”

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