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Marijuana Stocks React to a SAFE Banking Redux

After a brief run-up prior to the latest SAFE Banking hearing, marijuana stocks “sold the news” on the day of the event.

Marijuana leaf piggy bank averaging into cannabis stocks, saving marijuana stocks

Cannabis stocks sold off sharply this week even though the Senate banking committee held a key hearing on favorable bank reform that would provide a huge lift to the group.

The hearing turned into a classic “sell the news” event. Cannabis stocks sold off 10% or more as the hearing progressed, and after it ended.

The sell-off is a buying opportunity for the group. That’s because the hearing and comments from politicians and analysts tell us cannabis banking reform has a good chance of going through. The reform bill, called the Secure and Fair Enforcement (SAFE) Banking Act, would allow banks to serve state-approved cannabis companies without fear of a crackdown by federal regulators.


The banking reform is sorely needed. It would de-risk dispensaries which can only take cash in sales, and improve cannabis company access to loans and other sources of funding. The cash-only nature of dispensaries puts a target on them for hold-ups, which seems unfair to employees to say the least. The all-cash nature of the business also opens the door for assaults, tax fraud, and money laundering. The reform would give companies better access to funding and the use of credit cards in stores without risk of a federal crackdown. Cannabis is still illegal at the federal level.

The legislation has passed the House seven times, but the Senate has never held a vote on the measure. This time around, the odds seem reasonable that approval may happen, given that lawmakers on both sides of the aisle have introduced versions of SAFE banking in the Senate and the House. The reform has the support of the American Bankers Association (ABA).

The reform bill was recently refiled by: Sens. Jeff Merkley (D-OR) and Steve Daines (R-MT), and Reps. David Joyce (R-OH) and Earl Blumenauer (D-OR). Senate banking committee chair Sherrod Brown (D-OH) said senators plan to “move quickly” on the proposal.

The bank bill is not the only positive development for cannabis stocks coming out of Washington, D.C.

* House Speaker Kevin McCarthy (R-CA) recently said he will allow committee debate and a vote on a bill that would legalize marijuana at the federal level. McCarthy was responding to a request from Rep. Nancy Mace (R-SC) who has sponsored the States Reform Act, first introduced in November 2021. The bill would end federal marijuana prohibition. Mace has not yet refiled the bill. Mace regularly attempts to convince her party to ease up on cannabis restrictions to win voters.

* A bipartisan group of congressional lawmakers in late April refiled a bill that would provide a safe harbor to insurance companies that work with state-licensed cannabis businesses. The Clarifying Law Around Insurance of Marijuana (CLAIM) Act is sponsored by Reps. Nydia Velázquez (D-NY) and Warren Davidson (R-OH) in the House and Sens. Bob Menendez (D-NJ) and Rand Paul (R-KY) in the Senate.

Even without federal reforms, U.S. legal cannabis sales could hit $71 billion in 2030, more than double the $30 billion in sales last year, predicts New Frontier Data. “As more established markets across the country stabilize, the U.S. cannabis industry will be buoyed by new markets coming online,” says the research group.

But the Senate banking committee hearing on cannabis banking tells us that the prospects for federal reform are actually pretty good. For insider insights on the timeline for reform, and the best cannabis stocks to invest in to benefit, consider subscribing to Cabot Cannabis Investor.


Michael Brush is an award-winning Manhattan-based financial writer who writes a stock market column for MarketWatch. He is editor of Brush Up on Stocks, an investment newsletter. Brush previously covered the stock market, business and economics for the New York Times, the Economist Group, MSN Money, and Money magazine.