SAFE Still Has A Chance, Despite McConnell's 'No To Cannabis Reform': Here's Why

“Here we are, us financial analysts trying to read the tea leaves and subliminal messages of powerful politicians (think of this more as an opinion piece),” said Cantor Fitzgerald's Pablo Zuanic after Senate Minority Leader Mitch McConnell (R-KY) called on Senate Majority Leader Charles Schumer (D-N.Y.) and Speaker Nancy Pelosi (D-Calif.) to strip the cannabis-related language from a large-scale defense bill.

“House and Senate Democrats are still obstructing efforts to close out the NDAA by trying to jam in unrelated items with no relationship whatsoever to defense,” McConnell recently said, referring to the National Defense Authorization Act.

See Also: Marijuana Banking Reform Not Part Of Defense Bill - No Hope For SAFE Act This Year?

The Analyst

"So, Sen. Schumer delivered, right?" continued Zuanic.

Schumer tried to add the Secure and Fair Enforcement Banking Act (SAFE) to the Defense Bill (NDAA) even though it did not work out, Zuanic explained. "He is not giving up and said, 'we’ll try to discuss (with Republicans) the best way to get it done.'"

The consensus opinion is now through the Appropriations Bill. However, there is no guarantee that the bill will actually pass during this Congress, reads the report. Although this does not equal actual passage, "We still believe the narrative that there are >60 votes in the Senate for SAFE," Zuanic noted.

The Thesis

Zuanic noted if the bill is to pass at all this lame-duck session, it will have to be on a standalone basis.

Still, if McConnell sees SAFE as “making the financial system more sympathetic to illegal drugs,” the analyst wonders whether McConnell will “whip” Republican Senators not to vote for SAFE.

That said, "if we want to be more positive, we could say maybe this is all about “horse trading,” for the now, and for the future."

"If you ask for the probability of the SAFE passage, we now say 49% only (vs. >70% before), but with the MSOS ETF at 12 now, that is not bad risk/ reward," Zuanic disclosed.

According to Cantor's analyst view, for stocks, SAFE, "on its own is positive, even though the larger and more impactful positive would be 'safe harbor language,' as that would propel the U.S. exchanges to uplist U.S. plant-touching stocks, rerating the entire sector."

Now What?

In Zuanic's view, this will depend on if and how SAFE is passed in the lame-duck session. Nevertheless, he sees reform momentum increasing.
Key House Republicans have taken a more boisterous and coordinated role (the co-chairs of the Cannabis Caucus, David Joyce [OH] and Brian Mast (FL); and the sponsor of the SRA, Nancy Mace [SC]), and have signaled a Republican-controlled House may be willing to “play ball” with incremental reforms," Zuanic concluded.

If that's the case, big-name players in the space — Cronos Group CRON CRON, Tilray Brands TLRY, Canopy Growth Corp. CGC WEED, SNDL SNDL and Organigram Holdings OGI OGI — stand to benefit.

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Photo: Kindel Media and Paula Nardini by Pexels