By Chibuike Oguh and Bansari Mayur Kamdar
NEW YORK (Reuters) -Shares of marijuana companies gave back early gains on Wednesday after jumping following a U.S. Senate committee voted to advance a bill that would give legal cannabis-related companies a boost by allowing them to access banking system services.
A bipartisan group of senators on the U.S. Senate Banking Committee voted to advance the Secure and Fair Enforcement Regulation Banking Act, also known as the SAFER Banking Act, which aims to protect banks offering financial services to legal marijuana companies. The bill now heads to the Senate floor.
In volatile trading, the U.S.-listed shares of several cannabis firms rose immediately after the Senate vote. But most later reversed course and closed lower.
Canopy Growth (NASDAQ:CGC) dropped 4%, Aurora Cannabis (NASDAQ:ACB) fell 4.7%, Cronos Group (NASDAQ:CRON) declined 1.9%, and SNDL Inc shed 1%. Curaleaf Holdings (OTC:CURLF) Inc closed up 3.7%, while Tilray (NASDAQ:TLRY) Brands finished flat.
Some cannabis-linked exchange-traded funds (ETFs) also pared earlier session gains. The AdvisorShares Pure US Cannabis ETF fell 0.6%, while the Roundhill Cannabis ETF gained 2.6%.
"The vote today is a positive first step in a longer process," said Jesse Redmond, head of cannabis sector at Water Tower Research.
"Today's news was largely priced in. Investors expected it to exit the banking committee. I expect bigger moves after we pass the harder hurdles," Redmond added.
An earlier version of the bill, the SAFE Banking Act, had failed to secure a Senate vote despite being passed seven times by the U.S House of Representatives.
Although recreational or medical marijuana use has been legalized in about 40 states across the U.S., the substance remains prohibited under federal law. As a result, legal cannabis companies are denied access to financial services.
That has severely limited access to financing and lending and forced the companies to resort to primarily using cash for transactions, which in turn has made them targets of violent crime.
"We've worked very hard on this and it's been four years of heavy lifting. To get it through the Senate banking committee is a major achievement," Boris Jordan, billionaire founder of Curaleaf Holdings, said in an interview.
If Congress passes the law, "banks will be allowed to service companies doing business legally in state jurisdictions, and it is likely to also allow for credit card usage," Jordan added.