Big Banks Vs. Cannabis: JPMorgan Reportedly Blocks Trading Of Some U.S. Marijuana Stocks

Banking giant JPMorgan Chase & Co. JPM may restrict the trading of certain U.S. cannabis-related stocks starting November 8.

According to Reuters, the company sent a letter to prime brokerage clients, citing compliance reasons: “J.P. Morgan (JPMS) has introduced a framework that is designed to comply with U.S. money laundering laws and regulations by restricting certain activities in the securities of U.S. Marijuana Related Businesses," the letter read.

It seems, however, the restriction will only apply to Over-The-Counter (OTC) traded stocks, and limit new acquisitions and shorting of these equities. JPMorgan clients with pre-existing positions will be allowed to sell their shares at will.

Other than these exceptions, JP Morgan noted, cannabis-related businesses that are fully compliant with federal U.S. law, and can thus listed on the Nasdaq, the New York Stock Exchange or the Toronto Stock Exchange will continue to be permitted to trade. These are non-plant-touching businesses operating in the U.S. and elsewhere, as well as companies working with the cannabis plant in federally legal settings, such as Canada.

“JPMorgan's move to block its customers from buying securities in fully legal, regulated cannabis companies is beyond disappointing. Publicly-traded cannabis companies operate entirely within the law, and the industry is poised for tremendous growth,” Steven Hawkins, CEO of the U.S. Cannabis Council, said.

“JPMorgan's new policy is regressive and at odds with the majority of Americans, who want legal, regulated cannabis. What's more, it's self-defeating. The end of federal cannabis prohibition is within site, and the industry is already growing rapidly.”

JPMorgan, however, is not the first big bank to limit cannabis stock trading. Earlier this year, Credit Suisse Group AG CS  stopped handling transactions in shares of cannabis companies with U.S. operations, announcing plans to refrain from holding cannabis stocks on behalf of its clients.

U.S.-focused cannabis ETF AdvisorShares Pure US Cannabis ETF MSOS traded slightly down in Tuesday's after-hours session, while the ETFMG US Alternative Harvest ETF MJUS remained flat.

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