Low-quality cannabis driving consumers back into black market: Industry consultant
A House committee will probably pass a bill to get cannabis industry cash off the streets and into bank accounts, although a final vote may not happen until Wednesday, Cowen says.
Called the “SAFE Act,” short for the “Secure and Fair Enforcement Banking Act,” the measure would allow banks to service cannabis companies that comply with state laws. The House Financial Services Committee is due to start debating several bills at 2 p.m., including the pot banking bill, which Cowen regards as “positive for banks and cannabis companies,” analyst Jaret Seiberg wrote in a note.
Though the “door is open” for this Congress to enact it into law, there are issues with Senate support, particularly as Majority Leader Mitch McConnell doesn’t “want to debate cannabis on the floor,” Seiberg said. That might mean the measure will get tucked into a broader bill. He also noted that Senate Banking Chairman Mike Crapo is from Idaho, a state that hasn’t legalized cannabis, and Crapo hasn’t discussed the SAFE Act as a priority.
Eight Capital’s Graeme Kreindler called the committee vote “an early step in the larger legislative process,” as better access to banking may further de-risk the U.S. cannabis sector and bolster its legitimacy.
Kreindler said businesses might be immediately able to increase customer spending by processing credit card transactions and lower the cost of capital by securing commercial lending at competitive rates, though it’s too early to fully assess implications for cross-border M&A and U.S. exchange listings.
Separately, Height Capital Markets reduced its odds of New Jersey legislation to legalize cannabis in 2019 to 45 per cent from 80 per cent after lawmakers scratched a planned vote. Connecticut will probably no longer feel pressure to legalize after setbacks in New Jersey and New York, analyst Hunter Hammond wrote in a note, although legalization in Massachusetts may “still encourage legislation.”
Cannabis-related exchange-traded fund ETFMG Alternative Harvest, ticker MJ, rose as much as 1.2 per cent in Tuesday trading. BI’s global cannabis index gained as much as 2.2 per cent. Cronos Group Inc. was the biggest decliner on Canada’s stock benchmark, tumbling after revenue missed the lowest analyst estimate.
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