Canna-Banks Moving Closer to Reality
The numbers are incredible.
Forbes reports, “Spending on legal cannabis worldwide is expected to hit $57 billion by 2027.”
The figures come from new research conducted by Arcview Market Research and BDS Analytics. The report shows, beyond a reasonable doubt, that the legal pot industry is going to be a behemoth.
In North America alone, the legal cannabis industry is expected to grow to a whopping $47.3 billion by 2027, notes the Arcview report.
In the U.S. specifically, the legal market is expected to surge to $25 billion by 2025, according to data from New Frontier Data.
And as we drill down into the data, things look even better.
To date in the U.S., approximately 64% of the population live in a state or region where cannabis is legal in some form or another.
If you’ve followed my alerts over the past year, you’ll recall we’re moving a lot closer to 100% of the U.S. populace being able to use, buy or sell marijuana products.
But where is all this money going? We know big banks are reluctant to get involved with cannabis companies.
But with billions rolling in, this money needs to go somewhere. Which leads me to a “budding” opportunity in the pot space.
A cannabis banking bill was introduced last month
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.
And to date, that’s meant that an industry that employs an estimated 211,000 full-time workers still doesn’t have regular access to something as trivial as business checking accounts.
Banks aren’t allowed to serve illegal industries, although the U.S. Treasury’s Financial Crimes Enforcement Network reports that 375 banks and 111 credit unions are doing so — a number that’s risen steadily over the past few years.
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.
The good news is that Congress is listening.
Regulators in states with legal cannabis are pressing for changes, and earlier this year a marijuana banking bill was approved by congressional committee.
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.
If the bill ultimately makes it into law, it could open new, cheaper funding to an industry that’s eager for growth capital.
Which banks could be first movers?
It’s a great question for folks looking to profit, but the answer is a lot more complicated than one may think.
As it stands today, few banks are willing to operate in this space. The ones that do are private banks.
But I think that is about to change.
Attorney General William Barr has stated he will not target any aspects of the legal marijuana industry and will respect states’ rights to operate accordingly with their own laws.
I think this means smaller regional banks could soon have a clear path to operate in the pot space, opening up a new way to play the space.
Those companies could be great opportunities. For example, Bank of Hawaii (NYSE: BOH) could be in prime position as the safe haven for legal cash generated in Hawaii’s legal industry.
Sierra Bancorp (NASDAQ: BSRR) is another example worth considering, as this bank operates smack dab in Southern California.
But there will be many, many more soon.
Of course, as of right now these are speculative ideas we expect to manifest down the road. However, a prepared trader is a paid trader.
For Technology Profits Daily,
Chief Technology Expert, Technology Profits Daily