Proposed House Bill Would Allow U.S. Cannabis Industry Access to Banks, But Not Stock Listings
A bill was introduced to Congress that would remove the banking prohibitions from the U.S. cannabis industry.
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Cannabis sales are licensed in more than 30 states, and multistate operators like Curaleaf Holdings and Green Thumb Industries are among America’s fastest-growing retailers. But cannabis’s federal illegality has limited these U.S. businesses’ access to banks and stock exchanges, and left their shares trading over-the-counter and at a discount to Canada’s fully legal—but wildly unprofitable—industry.
On Friday, a bill was introduced to Congress that would remove the banking prohibitions from the U.S. cannabis industry. As sponsor Rep. Ed Perlmutter (D., Colorado) noted in a Friday news conference, the multibillion-dollar industry has been forced to operate on an all-cash basis. “This creates a serious public safety risk for our communities,” he said.
Similar bank-relief bills passed in three previous congresses; but this year, passage in the Senate looks likely. What today’s bill doesn’t contain, however, are provisions to allow stock market listings and institutional ownership of Curaleaf (ticker: CURLF), Green Thumb (GTBIF) and their peers. It also lacks long-sought relief from a corporate income tax penalty that the industry faces, under which it’s unable to deduct any operating expenses other than the cost of goods sold.
“This bill does not currently solve the capital market issues,” said sponsor Rep. Steve Stivers (R., Ohio), while adding that it would allow banks to perform custodial services for the U.S. firms’ stock trading. Amendments to allow exchange listings might appear later, he said, in the House or Senate.
In over-the-counter trading Friday morning, the stocks of U.S. operators were flat to down. Green Thumb, for example, slipped 1%, to $34.55, while the Nasdaq Composite Index rose 1%
The Secure and Fair Enforcement Banking Act of 2021, dubbed the SAFE Banking Act, would provide a safe harbor under federal money-laundering laws for banks to accept deposits, extend credit, or process payments for state-legal marijuana commerce. An earlier version of the bill passed Congress in 2019 with broad bipartisan support, by a vote of 321 to 103.
U.S. operators welcomed the bill, as far as it goes. Cresco Labs (CRLBF) Chief Executive Charlie Bachtell says that a decade in the regulated cannabis industry has taught him that reform happens incrementally.
Cannabis is the fastest-growing industry in America, Bachtell says, but federal financial disabilities have made it like piloting a rocket ship with one-and-a-half hands tied behind your back. For instance, Cresco was searching last year for 40,000 to 60,000 square feet of Chicago office space for its 300 headquarters employees, he says. Most office landlords couldn’t accept the cannabis company, under the terms of the landlords’ debt.
Bachtell visited another cannabis operator recently and learned that they had more than $19 million in cash in their office safe. Neither the cannabis company or its landlord wants that. The SAFE act would relieve those problems. Bachtell says he will keep pressing for reforms on stock listings, taxation, and, one day, interstate commerce.
The U.S. marijuana industry is on track for sales of $20 billion this year, said another sponsor, Rep. Earl Blumenauer (D-OR), in Friday’s press call. With so much of that in cash, the industry’s more than 300,000 workers are exposed to risk. Legal dispensaries in the Portland, Oregon, region suffered around 100 robberies in the last year, he said, and the murder of one employee.
These public safety concerns have gotten support for the legislation from many law enforcement organizations and dozens of industry groups, including the American Bankers Association and the National Association of Realtors.
A Senate version of the bill will be introduced next week.
Write to Bill Alpert at [email protected]
