The U.S. cannabis industry is on the verge of its biggest win of 2021.
It looks like some major cannabis legislation has a strong possibility of being passed in the next few weeks – and if it does pass, it could set the stage for a monster cannabis stock rally into the end of the year.
The bill in question is the Secure and Fair Enforcement (SAFE) Act, commonly referred to as the Safe Act. The Safe Act is one of the most popular cannabis bills, and it has widespread support from both Democrats and Republicans.
The Safe Act would be a major growth catalyst for the U.S. cannabis industry by letting banks offer financial services to the cannabis industry without fear of federal prosecution.
For example, most cannabis dispensaries in the U.S. are being forced to operate in cash because they can't access credit card services from megabanks such as Bank of America (BAC) and JP Morgan (JPM). The Safe Act fixes this problem and many others.
For most of the year, it appeared that the Safe Act had virtually no chance of passing in 2021. Even though the House passed the bill in April of 2021, the bill never made it to the Senate floor for a vote.
A Positive Turn For Cannabis Legislation
However, the outlook for the Safe Act recently took an unexpected turn due to a bold move by one of the most pro-cannabis governors in the U.S. Here are some more details from Marijuana Moment.
Rep. Ed Perlmutter (D-CO) and a bipartisan list of cosponsors successfully fought to get a floor vote on adding language to NDAA that would prevent financial regulators from penalizing banks or credit unions that work with state-legal marijuana businesses. The congressman is the sponsor of the standalone Secure and Fair Enforcement (SAFE) Banking Act, which has passed the House in various forms four times so far and is identical to the new amendment.
While the legislation is not directly connected to defense-related issues, it's likely Perlmutter sees the must-pass NDAA as a potential vehicle for the reform that could make its way through the Senate, whereas all prior House-passed cannabis banking legislation has stalled to date.
As this passage mentions, attaching the Safe Act to a defense bill is unconventional. But this could actually be the trick that gets the bill passed. Senators likely won't want to hold up a massive defense bill because it includes popular cannabis legislation.
The Senate should be voting on the bill within the next few weeks and, if passed, it would be a major catalyst for U.S. and international cannabis stocks because it:
- Enables U.S. cannabis industry to access basic financial services
- Gets the ball rolling on legalization
- Gives investors confidence that more cannabis bills will be approved
Cannabis Stocks Are On Sale Right Now
When word hit the wire that the Safe Act was being packaged into a defense bill, cannabis stocks spiked. However, in the long run, U.S. cannabis stocks are down sharply this year.
The Advisorshares U.S. Cannabis Stock ETF (MSOS) is down 45% from the 52-week high. Take a look at the 12-month chart below.
What Should We Expect Moving Forward?
Looking forward, this looks like a great setup.
U.S. cannabis stocks are down sharply from the 52-week high, while the industry has a potential major catalyst directly on the horizon.
I think that our member-exclusive portfolio is in excellent shape to ride the anticipated pop. Start your 2-week free trial to CST and see our portfolio holdings and get our trade alerts and analysis.
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