Cannabis ETFs Get a Lift From Proposed Law 

Cannabis exchange-traded funds, real downers over the past few years, got a much-needed boost from proposed federal legislation that would ease financial transactions. 

ETFs with tickers like WEED, TOKE and CNBS were all higher on Thursday. 

The proposed SAFE Banking Act, now in the House of Representatives and the Senate, aims to prohibit federal regulators from penalizing financial institutions that provide banking services to cannabis companies, their owners and employees. It is, though, a measure with scant chance of approval, say industry watchers. 

Investors in cannabis ETFs are hoping the funds can hold on to Thursday’s highs, since they have largely been rewarded with “schwag” returns over the past few years.

According to the New Cannabis Ventures Global Cannabis Index, cannabis equities lost about 50% in 2022. The index stood at $8.30 on April 27, 2023, and has ranged from $23.79 to $7.77 this year. Nine cannabis ETFs are traded on U.S. markets, with assets under management of some $668 million, according to etf.com data. 

The legislation could “legitimize” the industry, Robin Giles, a CFP at Apex Wealth Management in Katy, Texas, told etf.com. 

“If the cannabis industry is able to use the federal banking system, that removes one of the major barriers that has limited growth,” she added.

Among those ETFs up on Thursday was the Roundhill Cannabis ETF (WEED), gaining nearly 8%. WEED recorded inflows of $560,000 year to date, and $3.36 million since the start of last year.  The Amplify Seymour Cannabis ETF (CNBS) added 5.2%, the AdvisorShares Pure US Cannabis ETF (MSOS), the largest cannabis ETF, gained 7%, while the Cambria Cannabis ETF (TOKE) added 1.9%. 

Giles said she recognizes the industry’s growth potential, but noted they are not a safe bet for retirement portfolios, due to their narrow focus: “If a client wanted to put some of their ‘play’ money into cannabis ETFs, I think it makes a lot of sense.”

One financial advisor has found cannabis a real downer.  

“I am a professional tax speaker and the one topic I will not speak on is taxation of cannabis,” said Larry Pon, a CFP and CPA in Redwood City, California. He sees the deleterious effects of recreational, although not medical, use, including having met with “high” clients. “A waste of time.”  

Follow Michelle Lodge on Twitter @lodgemich