Pot Stocks on a High After SAFE Act Reintroduced
The banking industry tends to treat marijuana entrepreneurs the way banker Henry Potter treated George Bailey in the 1946 movie It’s a Wonderful Life, which is to say, with contempt and scorn.
Bankers, especially those on the state and regional level, are typically conservative and they’ve been leery of the marijuana revolution. Despite the wave of state-level legalization, pot remains illegal at the federal level and bankers fear potential liability.
However, in a bullish development last week for the marijuana industry, bipartisan legislation to reform federal banking laws and allow state-legal marijuana businesses greater access to financial services was reintroduced in both chambers of Congress.
The latest effort to pass the Secure and Fair Enforcement (SAFE) Banking Act is spearheaded in the Senate by Jeff Merkley (D-OR) and Steve Daines (R-MT).
In the House, SAFE’s leading sponsors are Reps. Earl Blumenauer (D-OR) and Dave Joyce (R-OH).
Marijuana stocks soared on the news and the upward momentum has continued this week, renewing hopes that 2023 will be a “breakout” year for the industry. Polls show that marijuana legal reform is gaining popularity with voters, even within the Republican party.
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The House has passed the SAFE Banking Act on a bipartisan basis seven times, but the bill always hit a dead end in the Senate. Despite the hearty endorsement of Sen. Majority Leader Chuck Schumer (D-NY), the SAFE Banking Act was never brought to the Senate floor for a vote in the previous Democrat-controlled Congress.
“Forcing legal businesses to operate in all-cash is dangerous for our communities; it’s an open invitation to robbery, money laundering, and organized crime—and it’s way past time to fix it,” said Senator Merkley.
“For the first time, we have a path for SAFE Banking to move through the Senate Banking Committee and get a vote on the floor of the Senate. Let’s make 2023 the year that we get this bill signed into law so we can ensure that all legal cannabis businesses have access to the financial services they need to help keep their employees, their businesses, and their communities safe.”
See the following tweet:
To address the safety concerns resulting from these state legal businesses being shut out of banking services, the SAFE Banking Act of 2023 would prevent federal banking regulators from:
- Prohibiting, penalizing or discouraging a bank from providing financial services to a legitimate state-sanctioned and regulated cannabis business, or an associated business (such as a lawyer or landlord providing services to a legal cannabis business);
- Terminating or limiting a bank’s federal deposit insurance primarily because the bank is providing services to a state-sanctioned cannabis business or associated business;
- Recommending or incentivizing a bank to halt or downgrade providing any kind of banking services to these businesses; or
- Taking any action on a loan to an owner or operator of a cannabis-related business.
This legislation would also create a safe harbor from criminal prosecution and liability and asset forfeiture for banks and their officers and employees who provide financial services to legitimate, state-sanctioned cannabis businesses, while maintaining banks’ right to choose not to offer those services. The bill also provides protections for hemp and hemp-derived cannabidiol (CBD) related businesses.
SAFE would help solve the marijuana industry’s cash woes, by allowing canna-businesses freer access to financial services. It’s not just loans. Without access to banking, marijuana businesses lack the ability to process credit card payments, deposit cash, write checks to suppliers, and other functions they need to perform to remain viable businesses.
SAFE also would undercut the growing black market in marijuana sales and improve the industry’s financial transparency in legal cannabis states.
Editor’s Note: As I’ve just explained, the stigma surrounding marijuana and psychedelics is fast disappearing. That’s why I’ve launched an investment service called Marijuana Profit Alert.
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John Persinos is the chief investment strategist of Marijuana Profit Alert.
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