Shares of marijuana companies initially surged after a U.S. Senate committee voted in favor of a bill that would provide legal cannabis-related companies with access to banking services. The Senate Banking Committee approved the Secure and Fair Enforcement Regulation Banking Act, also known as the SAFER Banking Act, which aims to protect banks offering financial services to legal marijuana companies. However, the majority of cannabis firm stocks later reversed course and closed lower. While some exchange-traded funds also experienced a decline, the AdvisorShares Pure US Cannabis ETF fell 0.6% and the Roundhill Cannabis ETF gained 2.6%.
Jesse Redmond, head of the cannabis sector at Water Tower Research, commented on the vote, stating that it is a positive first step in a longer process. He also noted that the news had already been priced in by investors, who were expecting the bill to exit the banking committee. Redmond anticipates bigger movements in the stock market once the bill overcomes more significant hurdles. The earlier version of the bill, the SAFE Banking Act, had been passed seven times by the U.S. House of Representatives but failed to secure a Senate vote. If the bill is passed by Congress, legal cannabis companies will be able to access banking services and potentially use credit cards for transactions, ultimately reducing their reliance on cash.
Although marijuana use has been legalized in many states, it remains illegal at the federal level, resulting in legal cannabis companies being denied access to financial services. Limited access to financing and lending has forced these companies to primarily use cash, making them vulnerable to violent crime. Boris Jordan, the billionaire founder of Curaleaf Holdings, described the committee’s approval as a major achievement. He believes that if the bill becomes law, it will allow banks to service legally operating cannabis companies in specific state jurisdictions and may also enable credit card usage for these businesses.
