Beyond the Bong

SAFE Banking Act of 2019 Passes House

It was a landmark week for U.S. cannabis!

Back in March, the Secure and Fair Enforcement (SAFE) Banking Act made history by passing the House Financial Services Committee. It was the first cannabis reform legislation to ever do so!

And, as I wrote last week, House Majority Leader Steny Hoyer (D-Md.) told legislators to prepare for a floor vote on the cannabis banking reform bill. That made it the first piece of marijuana reform legislation to earn that distinction.

More importantly, though, the SAFE Banking Act got the two-thirds majority it needed to pass in the House!

There were 321 “ayes” to a mere 103 “nays.” Those in favor included 229 Democrats and 91 Republicans.

This was historic for the industry! And takes us one step closer to ending prohibition in the United States.

Soon, cannabis companies may no longer be prohibited, penalized or discouraged from being provided financial services.

It’s been a frustrating situation thus far. Even though many states have legalized adult-use and medical marijuana, most banks have been unwilling to take on the risk of working with legal cannabis companies or ancillary businesses because cannabis is still illegal at the federal level.

Again, these are legal companies that had no access to banking.

So this is the first step in leveling the playing field.

Naturally, our friends at the National Cannabis Industry Association praised the passage…

“This bipartisan legislation is vital to protecting public safety, fostering transparency and leveling the playing field for small businesses in the growing number of states with successful cannabis programs,” Executive Director Aaron Smith said.

Plus, we heard rounds of applause from the Marijuana Policy Project and the National Organization for the Reform of Marijuana Laws (NORML).

Now the SAFE Banking Act heads to the Senate, where there will likely be an uphill battle. But advocacy groups like NORML are cautiously optimistic.

Unfortunately, it hasn’t been all sunshine for pot stocks…

Pot’s Terrible, No Good, Very Bad Month

September has been somewhat of a bummer for cannabis.

We started the month heading higher after August’s sell-off, but things turned south as the vaping-related lung illness crisis gained steam…

U.S. Marijuana Companies Index

Last week, we saw more states clamping down on e-cigarettes. For instance, Massachusetts joined the fray by issuing a four-month ban on e-cigarettes and marijuana vaping products.

The problem is, the outbreak continues to spread.

The Centers for Disease Control and Prevention is reporting 805 cases of the vaping-related lung illness across 46 states, as well as 12 deaths in 10 states.

Nonetheless, the move toward legalization doesn’t appear to be derailed…

No. 12?

There are some truly great players that have worn the No. 12, especially under center in the NFL.

Arguably the greatest quarterback ever – New England Patriots’ Tom Brady – currently wears the number. So does the Green Bay Packers’ Aaron Rodgers.

And we can’t forget that Pittsburgh Steelers icon Terry Bradshaw donned No. 12 as well.

Well, Pennsylvania could be looking to bring No. 12 back home.

Currently, 11 states have legalized adult-use cannabis.

But it appears Pennsylvania Gov. Tom Wolf may be looking to follow in the footsteps of Illinois and Vermont.

Those two states legalized adult-use through legislative actions, not a referendum.

Pennsylvania law doesn’t allow for a voter referendum. So Wolf stated in a press conference last week that it was time the state’s General Assembly crafted a bill to legalize recreational marijuana.

The announcement received swift condemnation from the state legislature’s top Republicans. But the green revolution can’t be stopped as it continues to spread across the country.

The High Five

Below are this week’s High Five, where – each Monday – I cover the five pot stocks I believe will make major moves – up or down – in the week ahead.

1) Curaleaf Holdings (OTC: CURLF), the largest multistate operator (MSO), is poised to benefit from the House approving the SAFE Banking Act.

CEO Joseph Lusardi stated, “This is incredibly important legislation for an industry that represents approximately $50 billion in sales per year and is expected to grow to $80 billion by 2030…”

Curaleaf has also made it clear that its vape products do not contain vitamin E acetate, a chemical that has been linked to the vaping-related lung illnesses across the country.

2) Acreage Holdings (OTC: ACRGF) CEO Kevin Murphy called the passage of the SAFE Banking Act “a milestone moment for our industry.”

This step forward is significant for Acreage investors because Canopy Growth Corp. (NYSE: CGC) is waiting to officially acquire the MSO once there’s a change at the federal level.

Now, this act doesn’t clear the way for Canopy’s takeover. But it does mean the country is inching closer.

3) 3 Sixty Risk Solutions (OTC: SAYFF) could potentially be one of the losers from the SAFE Banking Act.

The company provides secure transport for $250 million worth of product each month. And it provides cannabis security consulting and guarding to more than 600 customers and more than 100 licensed producers in Canada, including Canopy.

But its subsidiary 3 Sixty Secure Corp. operates in the U.S.

4) KushCo Holdings (OTC: KSHB) might finally be able to turn around from the vaping crisis. That’s because manufacturers are looking to prevent counterfeiting.

The company has entered into an agreement with De La Rue, an anti-counterfeiting and authentication solutions provider. This will allow KushCo to provide standard and custom-branded security labels for cannabis products.

CEO Nick Kovacevich told Marijuana Business Daily that the company has already received inquiries from dozens of companies for millions of stickers.

5) Innovative Industrial Properties (NYSE: IIPR) remains my safe haven for pot stock investors.

Though it’s been choppy for most of the industry, Innovative Industrial’s shares have been rising following the passage of the SAFE Banking Act. The company has no exposure to the vaping epidemic since it’s a real estate investment trust.

The dividend payer also continues to expand its footprint.

As always, we like to compare the performance of our High Five with the benchmark Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF).

Over the past month, the pot stock exchange-traded fund (ETF) has trailed lower by more than 9%…

Chart - The High Five

But the biggest loser over the past month has been KushCo. The vaping crisis has eviscerated shares in September. And we’ve seen a 50% drop since the end of August.

Shares of 3 Sixty Risk Solutions have also trailed the Horizons Marijuana ETF.

But Acreage Holdings, Curaleaf and Innovative Industrial have outperformed the index over the past month.

September has been topsy-turvy, to say the least.

The monumental victory of the House passing the SAFE Banking Act has been overshadowed by the vaping crisis stemming from the illicit market.

So for pot stock investors, it’s one step forward, two steps back.

We’ll have to wait out the vaping crisis until we find answers… until there’s a single cause we can point a finger at. Then our positive catalysts will trigger a run higher in shares.

If you have a pot stock in mind that you’d like me to discuss here, leave a comment below.

Here’s to high returns,

Matthew