What happened

As of Thursday morning, marijuana stocks continued their upward surge that began on Wednesday after potentially groundbreaking banking legislation in the United States took a big step forward in its journey through Congress.

Canadian pot company stocks Tilray (NASDAQ: TLRY), Canopy growth (NASDAQ: CGC), and OrganiGram Holdings (NASDAQ: OGI) all jumped at least 5% early Thursday. As of 11:30 a.m. EDT, their earnings were as follows:

  • Tilray was 2.7% higher;
  • Canopy growth was 2.5% higher;
  • OrganiGram is up 3.9%.

So what

Marijuana companies don’t have the ease of doing business in the United States, even in states that have legalized cannabis. This is because federal restrictions prevent banks from doing business with cannabis companies. This forces the actors of the company to carry out transactions only in cash. But the SAFE Banking Act is reform legislation that would prohibit federal banking regulators from penalizing banking institutions for doing business with legitimate cannabis-related companies. And that legislation took a notable step forward in Congress this week.

Image source: Getty Images.

Now what

A voice vote in the House of Representatives earlier this week allowed the inclusion of the SAFE Banking Act in the broader National Defense Authorization Act. Cannabis banking reform legislation has already been passed by the House alone, but has yet to advance to a Senate vote. Its inclusion in the National Defense Authorization Act would give it a better chance of passing both the House and the Senate.

Passing the SAFE Banking Act is not the equivalent of federal legalization, of course. But cannabis companies doing business in states that allow medical or recreational use will benefit immediately. The current situation forces them to spend more on security, for example, since they operate as cash-only businesses. And there are many other logistical costs that they could avoid if they had normal access to the banking system.

Canadian companies already doing business in the United States – or aspiring to do business here after the federal legalization of cannabis – should also benefit. Tilray has built an infrastructure base in the United States that it plans to operate once it becomes legal. Its businesses include craft brewer SweetWater Brewing and Manitoba Harvest, a hemp, CBD and wellness products company. CEO Irwin Simon has presented operations in the United States as a key part of his plan to increase Tilray’s annual revenue to $ 4 billion by the end of fiscal 2024.

Canopy Growth launched a line of CBD infused drinks for the US market earlier this year. This was in addition to its partnership with the beverage company Constellation brands. If the SAFE Banking Act passes Congress, it will be another step towards opening up a huge new market for Canadian pot producers, which is why investors are pushing their stocks up.

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Howard Smith owns shares of Tilray, Inc. The Motley Fool owns and recommends shares of Constellation Brands and OrganiGram Holdings. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.