In perhaps a less-than-intuitive chain of causation this past week, the results of two Georgia state senate races became the triggering event for the Federal legalization of cannabis, and by extension, the removal of a major headache for the nation’s banks and payments processors. Democrat Jon Ossoff’s win over incumbent Republican David Perdue, and Democrat Ralph Warnock’s win over incumbent Republican Kelly Loeffler, effectively gave Democrats control of the US Senate, completing the “Blue Wave” that didn’t materialize on election day. The net result of the change of control in Congress means that Democratic-sponsored congressional bills already passed, like the 2019 SAFE Banking Act and the 2020 MORE Act, both aimed to federalize the legalization and decriminalization of cannabis, will likely finally get brought to the Senate floor for votes in the new 2021 session. And if all goes well, sent to the incoming President who will surely sign it into law.
More germain to this newsletter, should the legalization of cannabis come to fruition, it will be a major breakthrough for US banks and payment processors due to the resulting removal of constraints on interstate commerce (money movement associated with the sale and or distribution of cannabis) involving the currently federally banned substance. Further, it will open the doors for the US “cannabis economy,” which has the potential to be a major boon to the country, especially as the economy continues to suffer from the effects of the pandemic. Cannabis, in a similar way to alcohol, is a recession proof commodity and as such, stands to generate material revenue by way of taxes for states and municipalities, and additional revenue for banks and payment processors.
Taking cues from the market – a leading economic indicator – the results of the Georgia Senate races precipitated a breathtaking advance for the industry’s major cannabis growers and distributors:
Canopy Growth UP 20.8% for the week.
Cronos UP 29.9% for the week.
Tilray UP 34.16% for the week.
Granted, the cannabis sector stocks are volatile, but if you pull a weekly chart, you can see, right down to the 15+ hour window between Tuesday’s close and Wednesday’s open, the gap-up reflecting the bullish sentiment of investors subsequent to the election results.
Bottom line: as the cannabis growers and distributors go, so shall the banks and payments processors.
– Adam T. Hark, Managing Director, Wellesley Hills Financial, LLC