Canadian marijuana producer and processor Tilray (NASDAQ:TLRY) made history in July 2018 when it became the first pure-play cannabis company to trade publicly on a major U.S. exchange. Just three months later, the Canadian government legalized marijuana for recreational purposes, in addition to the already legalized medical use. TLRY stock, which went public at $17 per share, hit an all-time high of $178.85, for a gain of more than 950%.

Investors may have gotten a bit ahead of themselves, though, as shares quickly fell from that lofty high. TLRY stock currently trades around $12.50, and that’s after today’s 15%-plus pop.

As you might guess, TLRY stock is no stranger to wild swings. Case in point, shares shot up more than 150% in a week’s time earlier this year, as meme traders appeared to set their sites on the company. TLRY stock has experienced similar short squeezes a number of times in 2021, though they have been smaller in scale.

The real catalyst many investors are hoping for is for the good ol’ U.S. of A to green light the green stuff.

Why U.S. Legalization Matters

While Canada is a massive country in terms of geographical reach, it’s quite small in terms of population size. We’re talking about a little over 38 million people. The U.S. population is around 331 million, according to the U.S. Census Bureau. So, federal legalization in the United States would present a massive opportunity for cannabis companies.

A 2019 Gallup poll revealed that “12% of U.S. adults said they smoke marijuana, a percentage that is essentially unchanged since 2015.” Given that the adult population in the U.S. is 258.3 million, per the Census Bureau, this translates to almost 31 million people smoking pot, or roughly the same number as Canada’s entire adult population.

Further, as the cannabis sector continues to expand to include more consumption methods, as well as non-psychoactive products like cannabidiol (CBD), the total addressable market is expanding.

In May, Tilray merged with another Canadian cannabis company, Aphria, creating the largest cannabis company in the world by revenue. In a press release issued by the company, CEO Irwin Simon said the new Tilray has a “curated portfolio of diverse medical and adult-use cannabis brands and products, a multi-continent distribution network, and a robust capital structure to fund our global expansion strategy and deliver sustained profitability and long-term value for our stakeholders.”

In an interview with Bloomberg following the merger, Simon described his three-pronged strategy for global expansion.

Tilray aims to capture a 30% share of the Canadian adult-use market, up from 17% to 18% at the time of the merger, according to Simon. It hopes to achieve this by expanding its brands and developing new products, including drinks and edibles. The company also wants to use its current distribution system to sell more medical marijuana in Europe.

But it’s the United States where the biggest opportunity lies, provided Uncle Sam takes a cue from his northern neighbor.

Simon said: “We will have consumer products standing ready for recreational use in the U.S. once legalization occurs. We’ll look to do an acquisition in consumer packaged goods world that will help us parlay into recreational cannabis. We may also do something in the medical world in the U.S., for example, a topical cream.”

But what are the chances the U.S. goes green?

U.S. Legalization Far From a Sure Thing

So far, 36 states and the District of Columbia have legalized medical marijuana, while recreational use is legal in 19 states, plus D.C.

Issues related to decriminalization and recreational use are popping up on ballots across the country. Most recently, 70% of voters in Philadelphia said the city should push for the legalization of recreational marijuana at the state level.

The trend is clear. Earlier this year, the Pew Research Center revealed that “Americans overwhelmingly say marijuana should be legal for recreational or medical use.”

TLRY stock seems a bullish proposition ahead of growing calls for federal legalization. However, this is far from a done deal, even with the Democrats in control.

One of the reasons voters were excited about a Democratic administration was the hope for cannabis legalization. While President Joe Biden didn’t go as far as some candidates, he said on the campaign trail that he supports decriminalizion. Yet, Democrats control the government by the slimmest of margins and many are not eager to rock the boat for fear it could hurt their chances for reelection.

However, it appears there may be growing support for legalization on the right. On Friday, draft legislation from Rep. Nancy Mace, a Republican from South Carolina, was leaked. The preliminary draft is a compromise that doesn’t go as far as Democrats’ federal marijuana legalization bill, but it may be a big step toward actually getting something passed.

The Bottom Line on TLRY Stock

The public and a growing number of politicians appear to be getting behind marijuana legalization. But assuming it’s a sure thing is a mistake.

If you’re keen on TLRY stock, you should base your forward assessments on the possibility that federal legalization doesn’t happen. If it does, it’ll be a nice bonus. If it doesn’t, at least you’ll be prepared.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.