Cannabis stocks are about to make a big move over the next several weeks.
What is going to send the group higher?
It looks like the Senate really is serious about moving on key bank sector reform that would help the companies immensely.
At issue is something called “SAFE banking,” known formally as the Secure and Fair Enforcement Act. It has been kicking around for years. This is not surprising because companies that legally (under state laws) sell cannabis are forced to transact in cash because marijuana remains illegal at the federal level. That’s a huge problem. That makes dispensaries targets for thieves. It is inconvenient. And it is a recipe for money laundering.
SAFE banking would carve out an exception to federal rules prohibiting banks from getting involved in businesses that are illegal at the federal level.
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The Senate banking committee held hearings on the latest version of SAFE in May. Industry experts were not entirely happy with how that went, because some of the testimony was lukewarm, at best.
Since then, Senate Banking Committee Chairman Sherrod Brown (D-OH) said last week he wants to hold a vote on the marijuana banking bill in the next few weeks. This is what would get cannabis stocks moving.
Marijuana Leadership Campaign director of government relations Don Murphy thinks the bill would be filibuster-proof in the Senate. Curaleaf (CURLF) board chair Boris Jordan thinks the implications of SAFE banking approval would go beyond the letter of the law. That’s because it would represent a major federal law that recognizes the industry.
Any cannabis stock move on these developments will likely be a time for profit-taking if you are an active trader. That’s because if it happens, there will then be a lull in activity on SAFE – at least for August if not longer. Personally, I’m a long-term investor and it is hard to know what other good news might hit or when, so I’ll just hold through.
Besides, some analysts question the viability of the bill in the Republican-controlled House. Though a majority of voters favor legal recreational use, the margins are narrower among conservatives. So, conservative lawmakers – like those who now control the House – are more likely to oppose changes that favor the cannabis sector.
“We do not see a clear path for the SAFE Act to advance through the House as important Republican leaders oppose both the SAFE Act and legalization efforts,” says Jaret Seiberg, an analyst at the TD Cowen Washington Research Group. The bill has passed in the House several times, but that was back when it was controlled by Democrats. SAFE banking bills were reintroduced in both houses of Congress earlier this year.
That said, cannabis is an issue that brings out voters, and this makes it a potential issue for conservatives to exploit. Rep. Nancy Mace (R-SC) knows this, which is why she is encouraging conservatives to loosen up on cannabis opposition to attract voters. It remains to be seen how successful she is at changing minds, but give credit where it is due. This is a politically savvy strategy. As for the House, not everyone has given up hope. Jordan, at Curaleaf, notes that House speaker Rep. Kevin McCarthy (R-CA), has supported SAFE banking in the past.
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