As the political landscape in the United States continues to evolve, the reintroduction of the Secure and Fair Enforcement (SAFE) Banking Act has caught the attention of investors and industry insiders alike. In fact, cannabis-related stocks experienced a significant boost on Apr 27 as the Secure and Fair Enforcement (SAFE) Banking Act gained traction in the U.S. Senate and House of Representatives.

Lawmakers, including Sen. Steve Daines (R-MT), Sen. Jeff Merkley (D-OR), Rep. Earl Blumenauer (D-OR), and Rep. Dave Joyce (R-OH), are pushing for the legislation to provide financial services to the cannabis industry. By shielding financial institutions from federal prosecution for working with cannabis companies, the SAFE Banking Act aims to remove a major hurdle for the industry.

Inside the SAFE Banking Act

Currently, many banks avoid working with marijuana companies due to the industry's illegal status at the federal level. This has led to a reliance on cash transactions, making it difficult for cannabis businesses to access loans, lines of credit, and other essential financial services.

The Safe Banking Act seeks to address this issue by prohibiting federal banking regulators from penalizing banks and other financial institutions that serve state-legal cannabis businesses. If passed, the SAFE Banking Act would level the playing field for marijuana businesses in states where cannabis, facilitating growth and attracting investment.

Biden Administration's Stance

President Biden has demonstrated his commitment to marijuana reform by advocating that no one should face incarceration for using or possessing the substance. In October, his administration issued a pardon for all prior federal offenses related to simple cannabis possession and encouraged state governors to take similar action for state offenses.

Additionally, in December, President Biden signed the Medical Marijuana and Cannabidiol Research Expansion Act to promote marijuana research, including potential health benefits, and create a pathway for the FDA to approve commercial drug production based on cannabis.

The Potential Impact on Marijuana Industry

Increased Market Confidence

If the SAFE Banking Act becomes law, it is expected to generate greater confidence in the marijuana industry. Investors may perceive cannabis businesses as less risky, leading to an influx of capital into the sector. This increased investment would likely cause marijuana stock prices to rise, offering potential gains for savvy investors.

Expansion Opportunities for Cannabis Companies

With access to banking services, marijuana businesses would find it easier to secure loans and other financial assistance. This, in turn, would enable them to expand their operations, increasing production capacity and market share. As these companies grow, their stock prices could follow suit, presenting further opportunities for investors.

Mergers and Acquisitions

The passage of the SAFE Banking Act may also lead to increased merger and acquisition activity within the marijuana industry. As companies consolidate and strengthen their market position, investors could benefit from these strategic moves, with stock prices potentially reflecting the improved market dynamics.

ETFs to Watch

As the SAFE Banking Act makes its way through Congress, investors should keep a close eye on marijuana ETFs that stand to benefit from the legislation. Below we highlight a few such ETFs. These ETFs added considerably on Apr 27.

ETFMG U.S. Alternative Harvest ETF – Up 5.8% on Apr 27

AdvisorShares Pure US Cannabis ETF (MSOS Quick QuoteMSOS - Free Report) – Up 7.3% on Apr 27

AdvisorShares Pure Cannabis ETF (YOLO Quick QuoteYOLO - Free Report) – Up 6.9% on Apr 27

Amplify Growth Opportunities ETF (CNBS Quick QuoteCNBS - Free Report) – Up 4.7% on Apr 27

ETFMG Alternative Harvest ETF (MJ Quick QuoteMJ - Free Report) – Up 6.1% on Apr 27