Marijuana News Today: U.S. Shuts Down Marijuana Banking, Hurting Stock Prospects

marijuana news today 14 jun
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Marijuana News Today

More bad political developments are in the marijuana news today as the U.S. House of Representatives voted down a measure that would have protected banks that open accounts for marijuana businesses from federal intrusion.

The House Appropriations Committee voted against the measure, preventing it from even reaching the House floor. This put banks once again in the unenviable position of wanting to get in on the lucrative marijuana industry but being unable to do so because of fears of federal retribution.

There was confidence that the committee would pass the measure and that they would be attached to legislation to fund the Department of the Treasury—all but assuring that the measure would be put through.

But several key Republican supporters of cannabis legalization were absent during the debate and the issue lost steam.

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However, the marijuana news today was not all bleak; the U.S. Senate has taken the opposite approach to the House.

The Senate Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies included protections for medical marijuana in the initial version of its Department of Justice funding bill—introduced by Republican leaders, no less.

Major U.S. political figures have also begun to support marijuana reform in the U.S.

Last week, President Donald Trump once again came out in support of states’ rights when it comes to marijuana legalization.

Then, on June 13, Federal Reserve Chairman Jerome Powell also lent his support for resolving the marijuana legal problem that the U.S. faces.

“This is a difficult area, because many state laws permit the use of marijuana and federal law still doesn’t,” said Powell at a news conference. “So it puts federally chartered banks in a very difficult situation.” (Source: “Marijuana Banking Measure Rejected By Congressional Committee,” Forbes, June 13, 2018.)

The Fed chairman implied that he would like the issue to be resolved with a change in policy. “It would [be] great if that could be clarified,” said Powell. “Our mandate has nothing to do with marijuana, so we just would love to see it clarified.”

Another major Republican figure, Treasury Secretary Steven Mnuchin, has previously expressed support of fixing the marijuana banking issues.

“I assure you that we don’t want bags of cash,” testified Mnuchin before a House committee in February. “We do want to find a solution to make sure that businesses that have large access to cash have a way to get them into a depository institution for it to be safe.”  (Source: Ibid.)

In an earlier appearance before Congress, Mnuchin even went so far as to claim that the marijuana banking issue was at the “top of the list” of his department’s concerns.

Marijuana companies are dying for, not only safer ways to store their cash, but institutional investors.

Without legal protections, however, banks and other major investors are unlikely to sink capital into the industry with the federal government weighing over them.

As such, we’re seeing a huge roadblock obstructing potentially billions of dollars in investment from reaching the marijuana industry, impacting stock futures.

That will likely change one day—and soon—but, until it does, marijuana stocks will suffer.

CGC Stock News

In keeping with yesterday’s trend, the marijuana news today on the stock market does not reflect the weak developments in the U.S. political realm.

The legal marijuana industry is continuing to rally to close the week off after a poor beginning, with many stocks gaining over the past few days.

Chart courtesy of StockCharts.com

One such stock is Canopy Growth Corp (NYSE:CGC).

The biggest name in cannabis is up once more, with a gain of about three percent over the course of this week.

Despite having one of the rockier beginnings to 2018, due to the correction, CGC stock has become one of the best performers this year. Canopy Growth stock is currently up about 28% year-to-date.

The company’s dominant position as the largest and most stable marijuana stock to be featured on a major U.S. listing is going to pay off, regardless of slow U.S. political movement on marijuana.

That’s partly because of Canopy Growth stock’s reluctance to engage in the U.S. marijuana market, instead going global and maintaining a focus in Canada.

Both factors will help the company’s outlook as the U.S. continues to sort through its marijuana legal issues.

CRON Stock News

Another marijuana stock featured on a U.S. listing, Cronos Group Inc (NASDAQ:CRON), has enjoyed short-term success on par with CGC stock, but it has, so far, been unable to replicate Canopy Growth stock’s gains over the year.

CRON stock is up by over four percent this week, making it one of the better performers in that time period.

Over the course of the year, CRON stock is down about seven percent. Calls of overvaluation have harried the company for months, especially after its massive gains following its listing on the Nasdaq.

Cronos stock needs to find a way to shed that perception if it hopes to make substantial and sustainable gains. Other companies were able to do so, usually by shedding a good amount of stock value.

I see CRON stock as being one of the more volatile performers for the remainder of 2018, with big swings in both directions in store.

Analyst Take

The marijuana industry is starving for more institutional investment, but the U.S. political class has been reluctant to feed them.

More institutional investment would be a win-win-win for the industry, the banks, and the economy. But until the political forces rally behind this move, marijuana stocks will have to wait to access that major pool of capital.

Meanwhile, other goodwill in the marijuana industry, like the approaching Canadian marijuana legalization, will be enough to propel many pot stocks to gains this summer—with or without U.S. political wins.