The U.S. cannabis industry has been severely restricted in its ability to access banking services because of federal prohibition. Two Canadian bank heads say they too will steer clear of the sector until new laws are passed.
It’s indicative of the limitations facing U.S. pot companies even as their market values surge and they engage in large-scale M&A like Cresco Labs Inc.’s $820 million deal last week to acquire Origin House.
With the reintroduction of the STATES Act on April 4, there are now two key pieces of legislation that could make it easier to run a cannabis business south of the border (if they can make it through the Republican-controlled Senate, which is a big “if”).
The STATES Act would exempt the Controlled Substances Act from applying to states that have legalized pot, freeing the industry from the threat of federal prosecution. If passed, many believe this would open stock exchanges and banks to work with the sector.
Don’t be so sure, says Cowen analyst Jaret Seiberg. “We are not convinced that the STATES Act would even be enough to convince banks to service legal cannabis companies,” Seiberg said in a note published last week. “It is why we see better prospects for narrower bills like the SAFE Act on cannabis banking.”
The SAFE Banking Act would allow commercial banks to offer services to pot companies that are in compliance with state law, but wouldn’t change federal prohibition of the drug.
Canadian bank executives say they are unlikely to touch the American cannabis industry until the laws change.
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