Adam Jackson
The cannabis industry may not have to remain in regulatory limbo for much longer, but it could take some last-minute horse-trading across aisles, according to Cantor Fitzgerald analyst Pablo Zuanic.
After a Sept. 26 trip to D.C. to meet with lawmakers, the Cantor analyst believes that Congressional leaders are poised to pass banking legislation for the cannabis industry in the lame-duck session.
The ‘SAFE Banking Plus’ Act is an updated version of a bill that would harmonize state federal and state law by protecting financial institutions that provide banking services to cannabis-related ventures and ancillary businesses.
“We think that talk of a SAFE Plus (bill) is something that should be taken seriously,” Zuanic told investors during a zoom call on Monday morning. “It’s not just a jingle. It’s not a pipe dream. It’s something that’s ongoing. There are discussions at high levels in the Senate between co-sponsors of the SAFE Banking bill on the Republican side with Senate leadership.”
In addition to the provisions of the original ‘SAFE Banking‘ package — which was approved by the House for the seventh time in mid-July, but held up by Democratic leaders due to concerns of a lack of social-equity items — the extra pieces that entail ‘SAFE Plus’ could bring parties closer to a passage, Zuanic said, such as the inclusion of elements related to small business loans (SBA), allowing the VA to help veterans access medical cannabis, as well as expungement in the form of the HOPE Act.
The HOPE Act — sponsored by Reps. Dave Joyce (R-OH) and Alexandria Ocasio-Cortez (D-NY) — would help states begin the review process of state-level expungement by using federal grants to help cover financial and administrative costs.
He noted that the provisions related to veterans’ access and the more narrow $20-million budget tag for the HOPE Act could appease Republicans, as well as kicking the responsibility of expungement for cannabis-related prison sentences more toward the state level.
Additionally, throwing the cannabis research bill that recently cleared the House into SAFE Plus legislation could provide some extra cushion for the party’s concerns.
Zuanic added that most likely a leak to media outlets could occur before the election, followed by a press conference after the election when the draft is formally filed. By then, a vote on an agreed final version could take place in early December, he said.
The CLIMB Act proposal, which would allow exchanges to up-list cannabis stocks and provide civil protections for businesses and those tied to the cannabis industry, is also less contentious than Cantor may have thought before the D.C. visit.
“Prior to last week, we would have thought language from the CLIMB bill (allows uplisting) had zero chance of being part of SAFE Plus,” the analyst wrote. “While still a long shot, we think the probability is now better than zero (and better than the removal of the 280E tax rule, as how would the latter be funded?).”
“True, none of this is fait accompli, but with the sector at historical lows, we like the setup,” he added.
The most contentious item floating through these conversations is the removal of the 280E, which would allow cannabis companies to take standard federal tax deductions. Opponents of the move say that losing tax revenue generated from these businesses would go against the entire point of legalizing cannabis in the first place.
Supporters of removing federal tax burdens in the industry believe that it would be the best type of fiscal stimulus smaller operators struggling to stay afloat could quickly inhale.
Still, removing funding streams and creating a tax revenue shortfall does not appear to be an option Republicans will ultimately entertain.
Zuanic noted that SAFE Banking in its original version alone has 62 votes in the Senate chamber, so Democrats will need to be careful of what to include in the final draft proposal for the SAFE Plus version.
“In the past, we had feared SAFE or SAFE “Plus” would not be put forward to a vote in this Congress as it would not have enough support from key Democrats in the Senate,” Zuanic wrote. “But that is no longer our view.”
“Given the momentum, the comments made, the expectations created, and the heavy lobbying from various advocacy groups, we think Senate Democrats want to get this done. So, in that context, the leverage may be held by Republicans.”
Whether it is gaining votes in exchange for support of another retiring lawmaker’s pet project, or earning a nod from Senate Minority Leader Mitch McConnell by passing HR 841, which would define CBD as a dietary supplement and is a bill that the Senate Republican honcho particularly wants passed — there is room for legislative acrobatics.
“But obviously, you know, I want to be very clear — this is politics,” he told investors on Monday. “It’s a legislative process. It’s complicated.”
“In the end, maybe nothing happens, right? But I think it’s important to focus on the bipartisan side of things. If it’s about guns, abortion, gay marriage — issues or topics that are less bipartisan — it may be difficult to get done. Other than must-pass bills that have to be done in the lame duck, this will be one where there could be support from both sides of the aisle.”
