California is getting closer to sidestepping one of the biggest barriers for the marijuana industry.
On Tuesday (May 21), the California Senate voted in favor of legislation designed to designate special banks as being capable of participating in the marijuana industry.
During its third reading, the bill was approved by a vote of 36 to one. It will now move on to await approval from the State Assembly and California Governor Gavin Newsom before it can become law.
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“The bill would provide for the licensure and regulation of cannabis limited charter banks and credit unions for the purpose of providing banking services, as defined, to cannabis businesses,” the legislation indicates.
If approved, the legislation would create new state agencies: the Cannabis Limited Charter Banking and Credit Union Law and the Cannabis Limited Charter Bank and Credit Union Advisory Board. These would aid in the regulation of the bill itself.
This state regulation would offer a pressure release to legal marijuana companies in need of banking operations. However, under federal law, marijuana and its business remain illegal.
Attorney Robert Selna with California-based Wendel, Rosen, Black & Dean, told CNBC that the bill will help business “incrementally.” Companies won’t be able to get loans from the banking firms that apply to become state-chartered cannabis banks.
“It will help cannabis companies pay the rent, but how it corresponds with federal law is still a question,” Selna said.
Momentum for marijuana policy support increases
In March, the US House Financial Services Committee approved the Secure and Fair Enforcement Banking Act of 2019, otherwise known as the SAFE Banking Act.
This bill is designed to offer protections on banking activities with marijuana companies and could grant these firms options such as credit lines.
Pressure has been building on Congress to pass the bill since its positive vote by the committee. The bill was introduced in the House on May 7.
On Thursday (May 23), Marijuana Moment reported that the bill has gained two new co-sponsors, Representatives Hakeem Jeffries (D-NY) and Lauren Underwood (D-IL). In May alone, the bill has seen the addition of 15 new cosponsors.
“I think that the passing of the SAFE Banking Act could help to signal a larger shift in public opinion that may ultimately help legislation like the STATES Act to gain traction,” Marc Adesso, veteran cannabis attorney with law firm Waller Lansden Dortch & Davis, previously told the Investing News Network.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
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