Great analysis of the chances that the SAFE Banking Act becomes law from Howard Penney at Hedgeye Risk Management:
The MSOs rallied 7% last week on the back of a bipartisan group of lawmakers reintroducing the SAFE Banking Act. The bill has a 0% chance of passing without hearing from Senator Mitch McConnell. In reality, SAFE does not change much for the industry. Other reform elements around 280e taxes, interstate commerce, and an updated Cole memo are more impactful to the industry’s fundamentals. Unfortunately, lawmakers in Washington, DC, have had difficulty passing modest cannabis reform for several reasons, including the following:
- Playing Politics: The cannabis reform issue has become highly politicized, with Democrats typically favoring legalization and Republicans generally opposing it. This is because cannabis reform has become a highly controversial topic, with politicians more concerned with political posturing and pleasing their base than with finding common ground; this can make it difficult to pass any meaningful reform measures.
- No consensus: Even among people who favor cannabis reform, there may be differing opinions regarding the strategy that should be utilized. Some people may push for marijuana to be fully legalized, while others may merely favor incremental reform measures such as decriminalization or the legalization of medical marijuana. Because of this, it may be challenging to arrive at a consensus that has the potential to gain enough support to enact legislation.
- A seemingly insurmountable conflict: even though several states have decriminalized cannabis in some form, the drug is still Schedule 1, making it against the law on the federal level. Because of this, there is a potential for legislation at the state and federal levels to contradict one another, making it more challenging to enact effective rules and regulations.
- Lobbying and special interests: The cannabis sector in prohibition is in its infancy and rapidly undergoing change; as a result, a significant number of conflicting interests and stakeholders are involved. Lobbying efforts by these organizations (esp. pharma, tobacco, and alcohol) can sway legislators’ attitudes about the matter at hand and make it more challenging to enact reform measures that might not serve the interests of the lobbying organizations.
In general, achieving cannabis reform in D.C. is a complicated subject incorporating various elements, including political, social, and economic considerations. Even while there may be widespread popular support for cannabis law reform, D.C. is unlikely to change the challenging process actually to bring about significant change.