uploads/2019/02/KHC-EPS-3-1-1-1-1.png

Key Takeaways on the SAFE Banking Act Hearing

By

Updated

On Tuesday, the US Senate held a hearing on the SAFE (Secure and Fair Enforcement) Banking Act. On March 26, the House Committee passed the act. The act will need to pass the Senate before it is sent to the US president. If passed, the act would greatly help US cannabis businesses.

Article continues below advertisement

What is the SAFE Banking Act?

The SAFE Banking Act aims to protect financial institutions doing business with cannabis operators. Cannabis is still illegal at the federal level in the US. Banks engaging with cannabis companies could attract serious penalties. As a result, much of the cannabis business in the US takes place in cash.

With SAFE, this situation could change. The act would let banks offer services to cannabis-related businesses. They could also offer services to those businesses’ employees. This support would help companies eyeing the attractive US market.

Canopy Growth (WEED)(CGC) has picked up on the CBD (cannabidiol) trend in the US. Tilray (TLRY), and Aurora Cannabis (ACB) also have US CBD offerings.

Americans favor legalization

Interest in US cannabis legalization is growing. On Tuesday, Senator Cory Gardner stated that 95% of Americans were in favor of medical marijuana. Further, 63% were in favor of legalizing cannabis. Gardner also said that youths’ use of marijuana was lower in states where it is legalized. The legal cannabis market has forced out illegal sellers, creating a bottleneck in the black market.

Article continues below advertisement

Lending to businesses

SAFE‘s primary aim is to bring cannabis-related money into the economy. It would allow banks to lend to legitimate cannabis-related businesses in dire need of money for expansion. Without access to the banks’ lending services, the industry is missing a key source of funding.

With the SAFE Banking Act, financial institutions would face less risk. They could offer clearing services such as card payments and fund transfers to cannabis businesses. Cannabis packaging, supply-chain service, and equipment companies would also be able to access those financial services.

Without SAFE, cannabis businesses’ opportunities are limited. They do most of their transactions through a financial intermediary. Cannabis-related companies are often left without banking services, a lifeline for many businesses.

How stocks reacted to the SAFE hearing

The cannabis sector Horizons Marijuana Life Sciences ETF (HMMJ) was almost flat on Tuesday. On the other hand, Cronos Group (CRON) rose 4.4%, and Canopy Growth rose 2%. Interest in the cannabis industry is growing. As a result, more research is being done on its medical benefits. To learn more, read Medical Cannabis for Heart and Blood Pressure Patients.

Advertisement

More From Market Realist