Cannabis Chart Of The Week: Is The Sixth Time The Charm For The SAFE Banking Act?

On July 14, 2022, the U.S. House of Representatives passed the National Defense Authorization Act, which included the SAFE Banking Act. The Act has passed the House six times without being voted on in the Senate.

  • The blue line on the graph shows the price of the MSOS ETF, the most widely followed equity price index, from its inception in September 2020. The dates of the last four SAFE Act passages, along with the initial unveiling of the Schumer/Booker proposal for comprehensive cannabis federal legalization, are marked.
  • The MSOS index has risen an average of 8% in the weeks surrounding the last four House passages of the SAFE Act. The gains have been short-lived as the realization of the unlikely passage sank in.
  • The 8% average gain is rational if we think of it as the expected benefit from passage, times the probability of passage. One might, for example, postulate a 75% gain on Senate passage and a 10% probability leading to an expected increase of 7.5%.
  • The potential for 75% stock price gains on the SAFE Act passage is not fantasy. The Act would significantly increase the liquidity of stocks by allowing banks to provide custodial services for cannabis equities. Similarly, the major exchanges might feel emboldened to enable the up-listing of cannabis stocks. The resulting inpouring of institutional cash would likely boost cannabis multiples back to the …

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Cannabis Chart Of The Week: Is The Sixth Time The Charm For The SAFE Banking Act? on Benzinga