Sass Nesting for :hover does not work

For concatenating selectors together when nesting, you need to use the parent selector (&):

.class {
    margin:20px;
    &:hover {
        color:yellow;
    }
}

You can easily debug such things when you go through the generated CSS. In this case the pseudo-selector after conversion has to be attached to the class. Which is not the case. Use "&".

http://sass-lang.com/documentation/file.SASS_REFERENCE.html#parent-selector

.class {
    margin:20px;
    &:hover {
        color:yellow;
    }
}