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Cannabis Reform in 2022: The Good, The Bad and Ugly

Cowen says the removal of the SAFE Act from the defense bill in December was a blessing in disguise.
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The fact that the SAFE Banking Act legislation that would provide banking access for cannabis companies was removed from the defense bill in December could be a blessing in disguise, according to Cowen. 

The firm sees value in using the SAFE Act as a backup measure in case broader legalization legislation fails as congress rarely holds two votes on the same issue in between elections. 

"If one accepts the one-vote theory, then it may foreclose efforts next year (2022) to pass a more comprehensive bill that also provides access to capital markets, fixes the onerous 280E tax treatment, expunges prior minor cannabis possession convictions and bar federal enforcement against states that have legalized," analyst Jaret Seiberg said in a note. 

The SAFE Act was removed from a defense bill in December amid opposition from Senate Majority Leader Chuck Schumer and Senate Banking Chair Sherrod Brown. 

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Democrat Losses Could Spell Trouble

Democrats are expected to take losses in the mid-term elections, and that could be a signal that cannabis reform measures have a dim future in the legislative branch. 

While Republicans have softened their stance on legalization in recent years, an end of the Democratic majority in Congress could seriously hamper reform efforts. 

"It it is clear that getting 10 Senate GOP votes for full legalization is unlikely. As such, it makes sense for us for Team Biden to begin this process as a backup in case Democrats cannot legalize or they lose control of Congress in 2022," Seiberg said. 

Cannabis Year-Long Decline

The major cannabis ETFs like Amplify ETF Trust  (CNBS) - Get Amplify Seymour Cannabis ETF Report, The Cannabis ETF  (THCX) - Get Cannabis ETF Report and AdvisorShares Trust  (YOLO) - Get AdvisorShares Pure Cannabis ETF Report have all taken a steep drop over the past year, with all three peaking in February 2021. 

Amplify ETF is down more than 65% over the past 11 months, while the Cannabis ETF is down more than 70% and Advisor Shares is down 60% since last February.