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Post: Cannabis Watch: Senate Democrats face two possible avenues for cannabis legislation

Two pieces of cannabis legislation have resurfaced in Washington, but both appear to have a bumpy path ahead of them.

The first, the SAFE Banking measure, would open up the financial system to cannabis companies. That measure was approved by the U.S. House of Representatives on Friday. It was tacked on by Rep. Ed Perlmutter to a larger piece of legislation — the America Competes Act, aimed at making the U.S. more competitive with China.

Although it’s the sixth time the U.S. House has OK’d SAFE Banking, it’s not expected to pass the U.S. Senate, analysts said.

“We appreciate any progress but have been here before and expect the banking provision to again stall in the Senate,” said Viridian Capital Advisors analyst Jonathan DeCourcey.

The SAFE Banking measure also drew fresh criticism from Senate Minority Leader Mitch McConnell, who described the SAFE Banking measure as a “poison pill” added onto the larger China bill.

“China has been steadily building up its military and economic might, and the Democrats’ answer is to help Americans get high?” McConnell said.

Meanwhile, Senate Majority Leader Chuck Schumer said Friday he is planning to formally file the Cannabis Administration and Opportunity Act (CAOA) in April. The legislation, which calls for social justice reform to counteract the effects of the War on Drugs, has been expected since 2021, but Schumer and other Senate Democrats have yet to move forward on it.

Also Read: Cannabis companies pivot to debt to raise capital as stock prices lag

Schumer’s Cannabis Administration and Opportunity Act faced obstacles “either by not offering sufficient social change to rally progressive Democrats or too much to garner support from the needed ten Republicans to cross the aisle and ensure passage,” DeCourcey said.

Alliance Global Partners analyst Aaron Grey also said the Cannabis Administration and Opportunity Act’s broad-based cannabis reform will have a more difficult time winning Republican support than the SAFE Act.

Grey and DeCourcey said it’s possible some  social justice amendments could be added to the SAFE Banking measure. They also agreed that any such development appears more likely in the second half of the 2022.

“We continue to believe the most likely path to meaningful legislation this year is banking specific reform (either stand-alone or attached to a 2023 funding measure) that will eventually be accepted by Mr. Schumer after his wider-ranging proposal has made the rounds,” DeCourcey said.

If Democrats lose seats in Congress after the mid-terms, as expected, they may push to “get something done…or risk losing the opportunity to Republicans,” Grey said.

Any talk of federal cannabis reform may feed positive speculation around cannabis stocks, DeCourcey said. But after a bruising year of losses, the sector remains undervalued with our without legalization from Congress, he said.

“Cannabis stocks are too cheap when considering the growth opportunity and the scale of operations (including profits) that companies have developed,” he said.

Pedro Palandrani, research analyst at the Global X ETF
said investors continue to watch legalization efforts closely, but no quick remedies are expected on the federal level.

“The U.S. is the largest market in the world and it’s that opportunity that cannabis companies are trying to capture but it won’t happen over night,” he said. “The foundations are being set in place. It’s a long-term potential for cannabis companies.”

The Global X ETF is down about 12.7% so far in 2022, including a dip of 1% on Tuesday.. The Cannabis ETF

has lost about 13.9% this year, but it edged up by 0.1% in morning trades. The AdvisorShares Pure U.S. Cannabis ETF 

subtracted 1.9% and is down 13.5% since Jan. 1.

Also Read: Leafly shares start trading after acquisition by SPAC Merida Merger

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