Speaking in front of the US Congress today, US Federal Reserve Chair Jerome Powell said clarity is needed for US banks dealing with cannabis companies.
Marijuana is illegal under Federal law but legal now in 10 US states creating conflict for financial institutions. A number of pot stocks are pushing higher today on this and other news.
Powell was asked by Democratic Senator Bob Menendez if banks needed clarity in order to assess how to deal with cannabis businesses in US states where the substance is now legal. Powell said that clarity would be “great” adding:
Financial institutions and their regulators and supervisors are in a very difficult position here with marijuana being illegal under federal law and legal under a growing number of state laws.
The current regulatory conflict, the Fed chair says, puts banks and their supervisory bodies in a “difficult place.” Insurance providers also need such clarity in order to address demand from the growing new sector.
A Congressional hearing took place earlier this month focused on banking problems for state-legal cannabis companies. Nearly 100 cannabis-related businesses filed written testimony requesting banking reform.
As the legalization of cannabis takes hold across the US, following Canada’s 2018 lead, it looks likely that clarity for US banks will come in 2019.
Powell’s comments may well help the banking issue though marijuana is not under the Fed’s remit. They certainly have done no harm as a number of pot stocks post increases on Tuesday.
Aurora Cannabis Inc is seeing 4% gains so far recouping some of its loss from earlier in February. It also announced its 51% ownership of Portugal-based Gaia Pharm today. Gaia received approval a few days ago to build an EU-compliant cannabis growing facility. Portugal approved medical cannabis in January of this year.
Shares of Aphria Inc are up over 5% in today’s trading session. The company has revealed a deal with Manna Molecular Science to develop cannabidiol (CBD) patches for both medical and recreational use. Aphria has five-year exclusivity on the new product. Its stock has now doubled in value since a dip in December. Aphria stock’s three largest institutional owners are Morgan Stanley, Vanguard Group Inc and Manufacturers Life Insurance Company. Morgan Stanley owns 2.59% of Aphria’s entire stock at a value of over $62 million and Manufacturers Life owns 1.78%.
Analysts Jefferies added coverage of five new cannabis stocks, also boosting the sector. Cronos Group shares are up over 7% and OrganiGram Holdings stock is up over 7.6%. Canopy Growth shares have also risen over 5% and Tiray Inc over 3% at the time of writing. Jefferies rates Aurora Cannabis a “buy” and Canopy Growth a “hold.”
Just days ago wealth manager Carol Pepper named pot stocks the “next huge growth area” predicting that with a physical product behind the market, the sector is unlikely to crash back like Bitcoin has recently.
Featured Image from Joe Rogan Experience/YouTube