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Marijuana banking law could create new opportunities for Main St. investors

Main Street investors may no longer be forced to sit on the sidelines of the booming cannabis industry if a promising banking bill that just passed the House gets Senate approval.

“U.S. money is going north, U.S. companies are going north, and Canadian investors are benefiting,” Saphira Galoob, a cannabis industry lobbyist with The Liaison Group, told Yahoo Finance.

Canada’s legalization of recreational marijuana in 2018, the first among G7 members, poses an increasing threat to non-institutional, American investors who are precluded from current growth opportunities in U.S. cannabis markets, according to Galoob.

“This bill is going to help individuals who are not otherwise able to access the cannabis industry, because they don't have access to private equity, and generational wealth,” she said. “[Canada’s] first-mover advantage is undermining an opportunity that we will not be able to reclaim if we do not address it quickly.”

Hands of man and woman passing marijuana joint. Getty Images

The SAFE Act, short for Secure and Fair Enforcement, which passed in the U.S. House of Representatives Wednesday, represents a comparatively conservative approach to Canada’s full legalization. If approved by the Senate, it would amend federal law so that commercial banking and other financial institutions could legally offer services to state-compliant cannabis businesses.

For the first time, those businesses would be able to open federally insured bank accounts from which they could manage deposits, as well as process paychecks, payments, and credit cards.

‘An important aspect of opportunity and growth’

In addition to opening investment avenues to Main Street investors, the bill is promising for emerging cannabis companies, which would have wider access to U.S. capital under the relaxed banking rules.

“An important aspect of opportunity and growth is ensuring that cannabis businesses in the U.S. have access to capital markets,” Galoob said.

“The smaller players, who are perhaps not as sophisticated and do not have the resources to work through the banking relationship applications and the compliance requirements, that's tougher for them — so I do think this will be more helpful to them, rather than the bigger multi state operators,” Jack Nichols, General Counsel and Chief Compliance Officer for Harborside Inc. (HBOR.CN), said in a joint call with Galoob.

Legalization advocates say Wednesday’s vote will likely translate to enough support from Senate Republicans to make the SAFE Act law. House Democrats voted 99% in favor of adoption, with all but one Democrat voting yes. House Republicans voted 47% in favor of adoption.

“Given the bipartisan nature of the House vote with nearly 50% of the Republican caucus voting in favor of the SAFE Banking Act, it is entirely realistic to see the bill succeed in the Senate should Leader [Sen. Mitch] McConnell give the legislation an up or down vote on the floor," Justin Strekal, Political Director for National Organization for the Reform of Marijuana Laws, told Yahoo Finance.

Smart Approaches to Marijuana, an advocacy group that opposed the bill, accused members of the U.S. House of Representatives of prioritizing major marijuana and Big Tobacco interests over public health.

As of Thursday, the U.S. Centers for Disease Control (CDC) confirmed 12 deaths from vaping-related respiratory illness. Probable cases of illness from vaping rose to 805 confirmed cases, up from 530 last week. "Americans are getting sick and a handful have died as a possible result of marijuana vaping. Surely this is not the time to reward Big Marijuana with investment opportunities,” said Dr. Kevin Sabet, president of SAM and a former three-time White House drug policy adviser in a press release.

Asked whether Tuesday’s announcement concerning a presidential impeachment inquiry will slow the SAFE Act’s progression, Galoob said on one hand the issue is “taking the oxygen out of the room” on cannabis talks, and on the other hand it is the most bipartisan policy currently under discussion on both sides of the Hill.

“It had big support from across the Congress,” the bills lead sponsor, Rep. Ed Perlmutter (D-CO), told Yahoo Finance’s YFi PM on Thursday, calling it “a big bipartisan victory.”

Alexis Keenan is a reporter for Yahoo Finance. She previously worked for CNN and is a former litigation attorney. Follow on Twitter @alexiskweed.


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