Congress poised to pass marijuana banking reform in lame duck

The Senate appears to have reached bipartisan consensus on the SAFE banking act, a bill that would open the federal banking and financial system to marijuana businesses that operate legally according to their state's law.

The Senate plans to attach this marijuana legislation to one of the year end “must-pass” bills, such as the NDAA.

Some additional notes:

1) The SAFE banking act has passed the house 6 times but has always died in the Senate. The most recent attempt last year was killed by progressives in the Senate who view the SAFE banking act as an easy win for investors/bankers while not doing much for those impacted by the war on drugs. A deal has been reached to include the HOPE act along with SAFE, which provides federal funding for states to expunge prior cannabis offenders, appeasing the demands of the progressives.

2) The NDAA is expected to be voted on this week, meaning we should see some major headlines regarding this cannabis legislation as soon as Monday.

What does this mean for cannabis stocks?

1) Aside from the news catalyst itself, the SAFE banking act should have a material impact on the financials of many of these cannabis companies. The language of the final version of SAFE is still unknown, but the core of the bill has always been to provide safe harbor for financial institutions to work with cannabis companies that are operating legally within their state. At the bare minimum, this will open the capital lending market to these companies, enabling them to get better terms on debt.

2) This will also provide safe harbor for hedge funds or other large institutions that may be interested in investing in the space but are unable to for compliance reasons.

3) Finally, the US cannabis companies (MSOs) cannot currently trade on the major US stock exchanges like the NYSE and NASDAQ. There is some back and forth as to whether SAFE will allow these stocks to finally uplist, given that these are financial depository institutions. Many believe that yes, SAFE will allow these companies to uplist at least on the TSX (Toronoto Stock Exchange) and likely even the NASDAQ/NYSE, and there could even be special language added to the final bill to specify this.

My own personal opinion: Once you get the bankers involved in this space, it's only a matter of time before the rest of the barriers come down. SAFE is the beginning of the end of cannabis prohibition as we know it.

I have long term positions in $MSOS, $GTBIF, $CRLBF, $TCNNF and $CURLF, as well as some small short term positions in $CGC and $TLRY.