Analysts See Senate Joining House on Marijuana Banking Law
A stronger-than-expected 321-103 vote in the House in favor of the Secure and Fair Enforcement Banking Act, which allows banks to service the cannabis industry, sets the stage for likely passage in the Senate, according to analysts.
The push for the SAFE Act is buoying pot stocks in pre-market trading, with Canopy Growth Corp. rising 4.3%, Cronos Group Inc. gaining 4.5% and Tilray Inc. rallying 3%. Cannabis-related ETF ETFMG Alternative Harvest, ticker MJ, rose 2.1%.
Here’s a sample of the latest commentary:
Compass Point, Isaac Boltansky
“We believe the House’s bipartisan clearance of the cannabis banking bill – which was an oasis of compromise in a day of partisanship – should be viewed as a tailwind for the bill’s prospects in the Senate.
While legislation will expand access to banking services for legal cannabis operators, Boltansky cautioned that the “immediate expansion would likely be modest,”as reputational and interstate concerns remain and the legislation doesn’t address worries about capital markets activity.
Raymond James, Ed Mills
“The strong House vote, coupled with the desire to provide a legislative win to vulnerable incumbent Senator Cory Gardner (R-CO), moves the odds of passage well above 50%,” Mills wrote in a note. Republicans’ support was more robust than expected, helped by a pro-hemp provision, and a provision targeting project Choke Point, he said.
Mills believes the Senate will allow the act to be attached to a year-end appropriations bill or another “must-pass piece of legislation” in the next six to 12 months. He added that anti-marijuana hardliners like Jeff Sessions have left the Senate/Trump administration, and Senate Majority Leader Mitch McConnell has “emerged as a potential supporter following his support of hemp legalization in last year’s farm bill,” noting that “Kentucky has a sizable number of hemp farmers.”
While the SAFE Act doesn’t legalize cannabis, he said that the “rapidly changing dynamic on the state level and allowing banks to legally bank cannabis-related business goes a long way toward normalization.” Even so, “any vote to legalize cannabis at the federal level is likely years away,” he said, flagging concern among legalization backers that resolving pressing bank issues may hurt the chances for eventual federal legalization.
Cowen, Jaret Seiberg
The vote “should add to momentum with Senate Banking expected to vote this fall on the measure,” which should set the stage for enactment before the 2020 election, Seiberg wrote.
Seiberg added that Cowen believes it’s “significant that the debate was civilized.” While there were calls for “social justice reform and broader legalization,” there were no attacks on banks or those pushing the act, he said. That matters, as an ugly debate might have convinced McConnell not to bring up the act.
He views the measure as “broadly helpful” to cannabis companies by giving them reliable access to banking and insurance services, with small banks and credit unions as likely best positioned. “Bigger interstate banks are likely to see the compliance headaches as not worth the benefit of entering this space,” he said. Seiberg also sees opportunities for publicly traded REITs, as “they will be able to service the cannabis sector and still retain their access to the capital markets.”
Earlier this month, CEO Jamie Dimon said JPMorgan Chase & Co. wouldn’t bank marijuana without changes to laws.
BTIG, Thomas Catherwood
Catherwood was less optimistic, writing that the SAFE Act “faces substantial headwinds in the Senate, though recent amendments could garner additional bipartisan support.” He flagged McConnell as the “greatest obstacle,” and reminded investors that a “realistic timeline for complete legislation is 14-17 months (if at all).”
He didn’t see a near-term impact on Innovative Industrial Properties Inc., which buys, develops and manages facilities leased to tenants in the regulated medical-use cannabis industry. As the company specializes in underwriting early-life-cycle companies, he saw little risk from added bank lending to cannabis operators.