Analysts are keeping a close watch on a US House of Representatives committee vote scheduled for Tuesday on a bill to get cannabis industry cash off the streets and into bank accounts. Called the ‘SAFE Act,’ the measure would allow banks to service cannabis companies that comply with state laws.
The vote is likely to come on March 26 and the measure will probably pass, analysts say, even though some Republicans are said to have raised questions about measures designed to prevent money laundering and ensure compliance with bank secrecy laws.
Cowen – one of the largest and the first US investment banks to enter the cannabis sector – still expects the March 26 vote, analyst Jaret Seiberg wrote in a note dated March 21. However, he wouldn’t be alarmed if there’s a delay to address questions from Representatives Patrick McHenry and Blaine Luetkemeyer about the bill’s impact.
He noted Representative Maxine Waters hasn’t signalled she wants to slow the process, though she might hold another hearing if McHenry were to pledge to back the bill, pending more clarity.
“McHenry is right that there is uncertainty about whether the SAFE Act is a perfect fix,” Seiberg said. “Solving this now would ensure that the bill which eventually passes is more useful.”
It would alarm Cowen if McHenry’s issues were to become a starting point for outright Republican party opposition to the SAFE Act. “If the SAFE Act moves out of the House on a party line vote, then the pressure for the Senate to permit the measure to get added to another bill will be much less,” Seiberg said. “And the prospects for enactment of pro-cannabis legislation will drop.”
Separately, Compass Point’s Isaac Boltansky said word of a “delay request is undoubtedly a headline negative for the cannabis banking effort,” but questions probably won’t alter the bill’s prospects. “We continue to believe that the SAFE Banking act will cruise through the House and is likely to secure enactment.”
The committee and the full House are likely to pass the bill, Height Capital Markets’ Ed Groshans wrote in a note. But he keeps his view there’s a less-than-25pc chance cannabis legislation becomes law, as there’s no consensus among Republican Senators. “Senate Majority Leader Mitch McConnell is highly unlikely to vote on any bill that divides the caucus, including cannabis legislation,” Groshans said.
Even if the bill passes, questions about its impact may remain as long as cannabis isn’t completely legal. “Most publicly-traded banks will continue to avoid marijuana-related activities until the drug is legalized at the federal level,” Bloomberg Intelligence senior policy analyst Nathan Dean said.
Cannabis-related ETF ETFMG Alternative Harvest was down as much as 4.6pc in Friday trading, the most since February 6, as the broader market slumped. BI’s global cannabis index fell as much as 3.1pc, with decliners including Aurora Cannabis, Cronos Group and Tilray. (Felice Maranz)