Will The SAFE Act Benefit Marijuana ETFs?
Last week, the U.S. House of Representatives voted 321-103 to pass the SAFE Banking Act, a measure aimed at bringing banking and financial services used by cannabis companies and dispensary operators out of the shadows and into the mainstream.
It was a rare display of bipartisanship on Capitol Hill, with 91 Republicans joining 230 Democrats in voting for the measure — but when it comes to cannabis exchange traded funds, enthusiasm was hard to find.
Last week, the ETFMG Alternative Harvest ETF (NYSE:MJ), the oldest and largest New York-listed marijuana ETF, slid 7.46%.
That extends a tail of woe that has seen MJ shed nearly a third of its value just in the third quarter, but to be fair, every other cannabis ETF is being drubbed too.
Why It's Important
The lack of reaction by MJ and other marijuana ETFs to the SAFE Act passage last week could be the result of multiple schools of thought.
First, markets may be pricing in the slim chance of the Senate passing the bill and President Donald Trump signing it into law. Second, investors may be focusing on more company-specific issues when it comes to cannabis funds, rather than political wranglings.
Still, it's hard to get around the fact that if the SAFE Act becomes law, it would be a boon for cannabis firms.
“The lack of federal legalization has not only created several operational obstacles and inefficiencies for companies involved in the cannabis ecosystem, but by forcing cannabis companies to operate only in cash it has created safety issues for employees by making them, and their places of work, targets of robbery,” according to ETFMG research.
It's a stretch, but with the 2020 election looming, Trump may consider more liberalization of U.S. marijuana laws.
After all, some states with potential swing state tendencies, namely Colorado and Nevada, have fully legalized cannabis, so it could make political sense for Trump to consider a more relaxed view of marijuana.
Even passing the SAFE Act would be a step in the right direction cannabis operators and investors.
“Although approval of the SAFE Banking Act would not fully legalize cannabis, it would prevent the federal government from taking action against banks, insurers and landlords that provide services to cannabis companies that are operating in compliance with applicable state laws,” ETFMG said.
“Not only would such legislation go a long way towards normalizing the industry, moving from a cash-only environment would significantly enhance public safety.”
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.