Federal Reserve Backs Cannabusiness?
Legal cannabis companies are getting sick of the onerous banking regulations that remain in place today, even in states where pot is fully legal for recreational adult use.
The feds make the most important rules when it comes to the banking sector, after all.
And to date, that’s meant that an industry that employs an estimated 211,000 full-time workers still doesn’t have access to something as trivial as business checking accounts…
While regulators have approved smaller banks to do business with cannabis-related companies, those clients have typically been required to only be in the periphery of the pot businesses (i.e., not directly handling the plant) or have been cut off from lending and checking services to avoid the ire of the feds.
It’s a big problem, and the industry is sick of it.
Only the latest call for the federal government to wake up on banking reform is coming from an unlikely source: the Federal Reserve itself!
At the American Bankers Association summit yesterday, the presidents of the Federal Reserve banks of Richmond, Kansas City and Atlanta each called for clarity from Congress.
The good news is that Congress is listening.
Last week, the House Financial Services Committee approved a marijuana banking bill that will see a vote from the full House.
If the bill ultimately makes it into law, it could open new, cheaper funding to an industry that’s eager for growth capital…
Meanwhile, while cannabis stocks would become clear winners from cannabis banking reform, one clear loser would be the private security companies currently contracted to protect the mountains of cash that legal cannabis businesses can’t currently bring into the banking system.
Walk into any dispensary today and you’ll likely see well-armed guards at the doors.
That’s not necessarily to protect the merchandise…
A bigger theft risk is the cash itself.
The need to deal in cash (most credit card issuers won’t allow cannabis purchases until they’re federally legal) adds considerable overhead for any cannabis company. Cutting that out will create an instant margin win for legal pot companies.
In the past, I’ve said that so-called “pick-and-shovel plays,” the companies that provide ancillary services to the cannabis industry, could be a solid option for your portfolio. Up until now, that’s included companies that earn revenue protecting pot businesses. But at this point, it’s clear that this ship has sailed.
While cannabis companies will likely still retain security even after access to the banking system is granted, it probably won’t be enough to move the needle at publicly traded security providers like Brink’s, which investors have been warming to as a pot backdoor.
We’ll look elsewhere to benefit from the exciting developments in legal pot!
More on those ideas next week.
For Technology Profits Daily,
Chief Technology Expert, Technology Profits Daily