Cannabis brings out mellow side of U.S. politics

Medmen Enterprises

13/02/2019 20:41

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By John Foley
    NEW YORK, Feb 13 (Reuters Breakingviews) - Even a divided
America seems to agree that the federal prohibition of cannabis
deserves a rethink. Six in 10 people say the use of marijuana
should be legalized, according to a recent Pew Research Center
survey. On Wednesday, a congressional hearing approached that
question only obliquely. But its narrow focus is more likely to
lead to action - and deliver what the industry really needs.
    Lawmakers from the Committee on Financial Services debated
whether banks ought to be able to take on cannabis-related
business in states that have made the drug legal. At present,
doing so leaves deposit-takers open to reprisals from federal
regulators. Companies therefore have a choice: find a local bank
prepared to provide basic services at a price, or stick to cash.
That’s one reason companies remain small. Two of the biggest
U.S. cannabis-related companies, MedMen  MMEN.CD  and
Charlotte's Web  CWEB.CD , are both well below $2 billion in
market capitalization. Canada’s Canopy Growth  WEED.TO , by
contrast, is 10 times larger.
    Legislation to give banks safe harbor – such as the draft
SAFE Banking bill lawmakers discussed on Wednesday – should
appeal to both sides. It would help create local jobs as well as
new revenue streams for banks. It also makes the cash generated
by the industry easier to see and easier to tax. In a sign of
cross-party appeal, Republican former House Speaker John
Boehner, who sits on the board of New York-based cannabis
company Acreage  ACRGu.CD , is among those supporting the bill.
    There are drawbacks to focusing on financing alone.
Congress’s brain space is limited, so more comprehensive
proposals could end up getting displaced. Unshackling banks does
nothing to address other issues such as the disproportionate
incarceration of low-income individuals and people of color on
marijuana charges. Nor would it change the tax code that
prevents cannabis sellers from deducting operating costs from
taxable profit.
    Still, there’s virtue in moderation. Many Republicans,
including Senate Majority Leader Mitch McConnell, have declared
themselves wary of full legalization. In any case, the thousands
of small businesses that grow and sell marijuana would risk
extinction if giant consumer-goods makers like Altria  MO.N  or
Kraft Heinz  KHC.O  were free to wade in and mop up. Freeing up
finance for weed companies may be the easiest way to please the
greatest number of people in the shortest time.
    On Twitter https://twitter.com/johnsfoley
    
    CONTEXT NEWS
    - The U.S. House of Representatives held a hearing on Feb.
13 to discuss the provision of banking services to cannabis
producers.
    - The subgroup of the Committee on Financial Services met to
discuss the SAFE Banking Act, a proposed bill that would protect
deposit-taking institutions that provide services to legitimate
businesses from regulatory reprisals.
    - Marijuana is legal for recreational use in 10 states as
well as Washington, D.C., but because the drug is illegal on a
federal level, banks are exposed to charges of money laundering
if they do business with companies in the sector.
    - For previous columns by the author, Reuters customers can
click on  FOLEY/ 
    - SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Statement from House Committee on Financial Services    https://financialservices.house.gov/uploadedfiles/hhrg-116-ba15-20190213-sd002_-_memo.pdf
BREAKINGVIEWS-The Exchange: Big Weed's big year     urn:newsml:reuters.com:*:nL1N1ZB147
BREAKINGVIEWS-Constellation finds pipe dreams and debt don’t mix
    urn:newsml:reuters.com:*:nL1N1Z90OM
BREAKINGVIEWS-Cannabis will take China tech’s path to propriety 
   urn:newsml:reuters.com:*:nL1N1YA0TX
BREAKINGVIEWS-Aphria bid takes weed M&A to new level of chutzpah
    urn:newsml:reuters.com:*:nL1N1YX0JO
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Tom Buerkle and Martin Langfield)
 ((john.foley@thomsonreuters.com; Reuters Messaging:
john.foley.thomsonreuters.com@reuters.net))