Why Cannabis Stocks Could Take Off Soon

There’s nothing that can light a fire under marijuana stocks quite like hype around legalization or any kind of reform in the sector. When the Democrats won the run-off Senate elections in Georgia in early January, giving them…

control of both the House and Senate, shares of the Horizons Marijuana Life Sciences ETF jumped 8% the following day (the S&P 500 was up around 0.6%).

At the time, there was excitement only for the possibility that reform might happen as a result of the Senate results. If there are actual changes, the bullishness could reach a whole other level. And while marijuana legalization may not happen anytime soon, the passage of the Secure and Fair Enforcement (SAFE) Banking Act could be on the horizon.

The SAFE Banking bill passes the House for the fifth time

The SAFE Banking bill isn’t new; this month, it obtained approval from the House for a fifth time. Lawmakers first gave it the go-ahead in 2019.

The bill would make it permissible for financial institutions and other types of organizations to do business with marijuana companies without having to worry about potential legal consequences. While it’s not impossible for marijuana companies to open up bank accounts at small financial institutions or credit unions, it’s difficult to do so, and they still won’t have the same access to banking services that businesses in other sectors do given the federal ban on pot. It’s also more cumbersome for financial institutions, as they need to fill out suspicious-activity reports on an ongoing basis. Many large banks stay clear of the industry altogether out of fear of repercussions from the federal government.

Will the bill finally receive full approval?

This latest action on the bill comes as it has been included as an amendment to the National Defense Authorization Act (NDAA). Although the NDAA is a defense bill that is unrelated to marijuana, SAFE Banking was nonetheless included in hopes of passing some much-needed marijuana reform. NDAA made it through the House easily with 316 votes in favor and only 113 opposed.

Attaching the bill to the NDAA gives the SAFE Banking bill more of a chance to pass. In April, the House passed the bill but it ultimately went nowhere — not due to a lack of support but because Senate Majority Leader Chuck Schumer’s priority is on more-significant marijuana reform, which includes outright legalization. That will undoubtedly be a more complex piece of legislation to pass, but it’s the latest reason the SAFE Banking bill has struggled of late. The inclusion into the NDAA could give it much better odds for success, although that’s still not a guarantee as it could again face resistance in the Senate.

However, this is probably the best chance the bill has at passing the Senate. If it fails or gets pulled out of the NDAA, that doesn’t mean marijuana reform isn’t coming, only that the Democrats likely don’t want to be content with modest changes in the sector.

Many stocks could soar on the news

If the SAFE Banking bill passes, all pot stocks could instantly get some renewed bullishness. In the past six months, while the S&P 500 has risen 12%, the Horizons Marijuana Life Sciences ETF has crashed more than…

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