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House Passes SAFE Banking Act to Protect Banks and Cannabis Companies

By Rich Duprey - Apr 20, 2021 at 10:36AM

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Will the fourth time be the charm?

Legitimate cannabis producers and related businesses would no longer be treated like illegal operations in the financial world if a bill that was passed Monday evening by the House of Representatives becomes law.

The Secure and Fair Enforcement Banking Act -- aka, the SAFE Banking Act -- would open up financing and allow banks to establish relationships with marijuana businesses operating in states that have legalized the plant for medicinal or recreational purposes. The measure specifically prevents federal regulators from sanctioning banks and other financial institutions that do business with such companies. The bill passed the House 321 to 101.

Marijuana on $100 bills

Image source: Getty Images.

Even though a majority of U.S. states have legalized marijuana for some uses, it remains a Class I controlled substance at the federal level. As such, banks are prevented from lending to companies operating cannabis businesses, or even letting them establish bank accounts.

This has meant the companies are forced to deal in cash, including paying their employees, which increases the risks of crime against them and their workers. It also hinders their growth.

Multistate operators like Cresco Labs (CRLBF -0.28%), Green Thumb Industries (GTBIF 2.86%), and Trulieve Cannabis (TCNNF -2.71%) would likely be the immediate beneficiaries of the SAFE Banking Act, though Canadian producers such as Aphria (APHA), Cronos Group (CRON -1.94%), and Tilray (TLRY) would undoubtedly see benefits down the road.

Yet the Act's prospects in the Senate are uncertain. Monday's vote marks the fourth time the SAFE Banking Act has passed the House. It was first approved in 2019, and then twice more when its provisions were included in larger coronavirus relief bills. In all three cases, the then-Republican-controlled Senate blocked it.

With Democrats now in control of the upper house, legal marijuana companies theoretically have a better chance to see the bill pass this time around.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Cresco Labs Inc., Green Thumb Industries, and Trulieve Cannabis Corp. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Tilray Stock Quote
Tilray
TLRY
Cronos Group Stock Quote
Cronos Group
CRON
$3.03 (-1.94%) $0.06
Green Thumb Industries Stock Quote
Green Thumb Industries
GTBIF
$10.42 (2.86%) $0.29
Aphria Stock Quote
Aphria
APHA
Trulieve Cannabis Stock Quote
Trulieve Cannabis
TCNNF
$12.92 (-2.71%) $0.36
Cresco Labs Inc. Stock Quote
Cresco Labs Inc.
CRLBF
$3.52 (-0.28%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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