The cannabis industry in the US took a significant step towards the mainstream this week following the passage of the SAFE Banking Act 2018.
The US House of Representatives voted overwhelmingly in favor of passing the Secure And Fair Enforcement (SAFE) Banking Act, by a margin of 321-103 to be exact, which will allow for banks to engage with cannabis companies without fear of legal repercussions. Under current federal legislation, banks are restricted from offering their services to cannabis companies and run the risk of prosecution in line with statues passed during the War on Drugs.
To highlight the extent to which current legislation impacts the industry, director of government relations for the National Cannabis Industry Association Michael Correia said, “If you do business with the cannabis industry, you can be liable for breaking money-laundering laws. National banks, Wall Street banks — they have more at risk, and they want to have more certainty.”
This has resulted in US pot firms dealing mostly in cash, which clearly isn’t appropriate for a multi-billion dollar industry, and makes cannabis companies prime targets for theft as well as increasing the likelihood of tax evasion. While most companies have found support on a local level from smaller banks and credit unions, larger national banks have been keeping their distance from the industry for fear of repercussions. However, SAFE will allow for national banks to engage with the industry and thus bring it out of the shadows.
Senator Ron Wyden, a Democrat from pot legal Oregon, said: “I can’t for the life of me figure out why people would want to have folks walk around practically with wheelbarrows full of cash.”
While pot companies are rejoicing over SAFE’s passage through the House, the struggle is far from finished. The SAFE Banking Act now faces the even more difficult challenge of making it through the Republican-controlled Senate, before making its way to the desk of the President. The likelihood of the act making it through the Senate before the end of the year is slim; however, pot companies can take solace in the fact that the legislation has considerable support from a lot of Republicans, who support the growth of what could be a $30 billion industry by 2025.
The passage of the SAFE Banking Act is being celebrated by pot companies across the US, but which ones could benefit the most should the act become law? Let’s take a look.
Curaleaf Holdings Inc (CSE:CURA) (OTCQX:CURLF) is a leading medicinal cannabis firm in the US that operates 44 dispensaries across 12 states. Curaleaf saw its stock climb 3.5% on Thursday as the company released a statement praising the passage of SAFE through the house. It’s no surprise to see the company be an advocate for the passage of this legislation, given that it was the top spender on cannabis lobbying in 2019, and looks set to be one of the major beneficiaries of the act.
If ratified, the bill will increase the safety of our operations for our patients, customers and employees by reducing the reliance on cash and promoting transparency […] In addition to normalizing the industry, the bill also provides more access to capital for cannabis businesses of all sizes, which will support social equity in our industry,” said Curaleaf CEO Joseph Lusardi. The increased access to capital will allow Curaleaf Holdings to expand its presence in highly populated, limited license states, such as Florida, Massachusetts, New Jersey, and New York.
Cresco Labs Inc (CSE:CL) (OTCQX:CRLBF) is the second-largest US pot stock by market cap, and its shares jumped by about 5% following news of the passage of the SAFE Banking Act. Like Curaleaf, Cresco is a big spender on lobbying and also released a statement this week, saying “the SAFE Banking Act would facilitate a safer operating environment for all stakeholders. We continue to see extremely encouraging progress made from a legislative standpoint at both the federal and state levels that is contributing to the normalization of the cannabis industry.”
Cresco Labs is well-positioned to take full advantage of expanding cannabis legislation given that it has one of the best distribution networks in North America as well as a broad portfolio of brands targetted at all corners of the industry. These include Mindy’s, a line of edibles created by award-winning chef Mindy Segal, and Sunnyside, a wellness-focused national dispensary brand. Cresco stock is currently valued at $6.25, and could be the biggest grower should SAFE make it through the Senate.
While election fever is starting to take over US politics, you might want to have a look at where some of the 2020 candidates stand on cannabis legislation, as it looks set to become one of the hottest policy points in the race for the Oval Office.
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