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Weed is likely to remain federally illegal, but 'cannabis banking' could pass this year

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Cannabis stocks climbed, then drifted in the days leading up to a House of Representative vote due this week on a bill to remove marijuana from the list of so-called controlled substances, effectively decriminalizing it.

But policy experts, cannabis investors and at least one member of Congress agree: Don’t hold your breath on federal legalization happening this year. One glimmer of hope for the industry could be a change to banking rules for marijuana businesses.

“I am bullish on cannabis banking getting done this year,” said Isaac Boltansky, director of policy research at BTIG, in an interview with Yahoo Finance Live. “You have a few vehicles it can be attached to, the defense bill or the China competitiveness bill. We know that lobbying is cumulative, and they were very close last year. And I think you can wrap cannabis banking along with some of these restorative justice and research bills to make it more palatable to progressives.”

The House is likely this week to pass the MORE Act, which “eliminates criminal penalties for an individual who manufactures, distributes, or possesses marijuana.” But it previously passed the bill in 2020, only for the legislation to stall in the Senate — a process that will probably repeat.

That process has also been repeated — six times — for the SAFE Banking Act of 2021. If passed, the bill would bar federal banking regulators from punishing financial institutions for providing services to a "legitimate" cannabis-related business. Democratic critics of the law argued in the past that it should be broader by legalizing marijuana at the federal level or including criminal justice provisions.

Congresswoman Nancy Mace (R-SC), a longtime advocate for cannabis legalization, told Yahoo Finance that she’s somewhat optimistic for some kind of legislation to get done this year: “I’m looking at trying to do some amendments on MORE to see if we can find some blend, some sort of consensus in a bipartisan way to meet that need across the country.” She has introduced her own version of the bill, called the States Reform Act, but it hasn’t gained traction.

While falling short of national legalization, the SAFE Act would be a game-changer for many cannabis businesses already operating across multiple states. Kim Rivers is the CEO of Trulieve (TCNNF), which owns marijuana dispensaries in eight states, the majority of them in Florida. Right now, she explained to Yahoo Finance, it’s largely a cash business. Besides creating a safety risk for shop workers, it limits payment options for consumers. Cannabis banking legislation would change that.

“It would also lower our cost of capital,” she said. “We have been subject to higher rates due to the fact that we’re limited in terms of banking partners. So having a more diverse network of banking options would certainly improve our cost of capital.”

Trulieve’s shares have struggled over the past year, falling nearly 50% since March 2021. It’s not alone. Green Thumb Industries’ U.S. shares (GTBIF) have fallen by about the same amount since last February. Curaleaf (CURLF) has fallen by 58% in that period.

Tilray (TLRY) ran up to a record high of $214.06 in September 2018, after a law to legalize cannabis sales was passed that June in Canada, and before it took effect that October. Today, the stock closed at $8.14.

All of the cannabis companies are domiciled in Canada because of the U.S. federal interdiction. Many of their stocks are also available to trade in the U.S., and many, like Trulieve and Curaleaf, have shops in the U.S.

Rivers is among those who think criminal justice reform needs to be a part of the conversation.

“I believe it’s incredibly important for us to not only focus on SAFE Banking but ... some kind of criminal justice relief, with letting out and expunging records," Rivers said. "There should not be anyone behind bars for cannabis distribution or sales given the fact I’m sitting with you on Yahoo Finance and in this seat selling cannabis in legal markets in the state structure today.”

Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9am-11am ET. Follow her on Twitter @juleshyman, and read her other stories.

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