US Representatives Troy A. Carter, Sr. (D-LA) and Guy Reschenthaler (R-PA) introduced on June 23rd the Capital Lending and Investment for Marijuana Businesses (CLIMB) Act. The news came on the heels of the Senate's rejecting the Secure and Fair Enforcement (SAFE) Banking Act for the sixth time. SAFE Banking Act aims to protect financial institutions that wish to provide their services to state-legal marijuana businesses.
This bill would enable cannabis businesses to access a wide array of banking services, not just credit card services, but money transfers, accounting services, and lending, to name a few. It would also amend the Securities Exchange Act of 1934 to let the New York Stock Exchange, Nasdaq, and other national securities exchanges list cannabis businesses, providing them with a new avenue to generate capital and grow.
“American cannabis companies are currently restricted from receiving traditional lending and financing, making it difficult to compete with larger, global competitors,” said Rep. Reschenthaler.
Sander Zagzebski, a corporate and securities lawyer at Clark Hill and co-chair of its international cannabis practice group comments, “Cannabis companies have always struggled with access to capital, NYSE and Nasdaq will not list cannabis companies with U.S. operations because those operations continue to be illegal at the federal level. Cannabis companies generally list on the Canadian Securities Exchange and trade only on the OTC markets in the U.S. if at all, which significantly limits institutional support and contributes to increased volatility.”
“The CLIMB Act will eliminate these barriers and provide state legal American cannabis companies, including small, minority, and veteran-owned businesses, with access to the financial tools necessary for success. This bipartisan legislation will boost the economy, create jobs, and level the playing field for American businesses,” he added.
The bill would additionally allow government agencies to offer grants and other sources of government funding to cannabis businesses, with an emphasis on those in areas most impacted by the War on Drugs.
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“Small businesses entering the cannabis industry face extraordinary challenges accessing capital,” said Michael Bronstein, President, American Trade Association for Cannabis and Hemp. “By creating funding avenues through the Minority Business Development Agency and Community Development Financial Institutions, the cost of capital will continue to decrease; thus, the United States cannabis economy will become more inclusive and within reach for the many, not just a few.”
By January 2022, the regulated U.S. cannabis industry supports over 425,000 full-time jobs. The state-legal cannabis industry produced nearly $25 billion in sales in 2021, outpacing other industries in size and growth. Domestically, the growth expectation for the industry is about $41.5 billion by 2025—making it the fastest-growing sector over the last decade.
The CLIMB Act could be seen as a bridge that helps move along other pending legislation, such as the SAFE Banking Act, it could even accelerate the ending of cannabis prohibition. While this new bill will not solve all the issues faced by the cannabis industry, if passed it could prove a welcome gust of wind into the sails of legal cannabis businesses.