An effort by some members of Congress to make traditional banking services more widely available to businesses involved in the legal marijuana industry could be a boon to exchange traded funds, including the ETFMG Alternative Harvest ETF (MJ) and the AdvisorShares Pure Cannabis ETF (YOLO).
Currently there are 11 U.S. states where recreational marijuana is legal: Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, Washington, and Washington D.C. However, the drug remains illegal at the federal level and banks are regulated federally, making it difficult for smaller cannabis businesses to access traditional banking services.
“American marijuana producers, bankers, and real-estate firms came to Washington this week to lobby Congress in favor of Rep. Ed Perlmutter’s marijuana banking bill,” reports Bill Alpert for Barron’s. “The Colorado Democrat has labored for six years to let financial institutions handle money from cannabis businesses in the states that have legalized marijuana. After the House Financial Services Committee backed his SAFE Banking Act in March, Perlmutter says he hopes for a floor vote before the end of June.”
Big Opportunities for Cannabis, Marijuana ETFs
Analysts see significant opportunities in the U.S. cannabis market, if federal regulators here legalize the drug. That could be huge for exchange traded funds (ETFs), including the, ETFMG Alternative Harvest ETF (NYSEArca: MJ) and the newly minted AdvisorShares Pure Cannabis ETF (NYSEARCA: YOLO).
However, critics may assert that in California, the largest U.S. state and a major grower of cannabis, legal recreational weed is not bolstering state coffers because of higher prices. Legal dispensaries in California typically charge high prices due to taxes required by the state. Those high taxes often prompt consumers to buy from illegal dealers, meaning California’s illicit marijuana market is still massive.
There is some bipartisan support to advance the SAFE Act.
“After a March hearing, during which industry representatives told of the dangers they face in carrying piles of cash from cannabis dispensaries, the Financial Services committee voted 45 to 15 to advance the bill. Eleven Republicans joined all the Democrats in supporting the reform,” according to Barron’s.
One component of the SAFE Act is to give banks immunity from prosecution when dealing with cannabis businesses as long as those banks are complying with state laws.
For more news and articles on marijuana ETFs, visit our Marijuana ETFs category.