The CLIMB Act seeks to boost cannabis industry financing and capital access
Today, Rep. Troy A. Carter, Sr., a Democrat from Louisiana, and Rep. Guy Reschenthaler, a Republican from Pennsylvania, introduced a new bill called The Capital Lending and Investment for Marijuana Businesses (CLIMB) Act. If passed and signed into law, The CLIMB Act could give a significant boost to a cannabis industry that is currently struggling with growing pains, a lack of access to capital, difficulty in obtaining banking and other standard business services, high taxes, and a consumer base feeling the sting of inflation and the potential for a looming recession. While The CLIMB Act will not resolve all the issues facing the cannabis industry, if passed, along with other pending legislation like the currently pending SAFE Banking Act (which addresses banking services to the cannabis industry), it could prove a welcome gust of wind into the sails of legal cannabis businesses. The CLIMB Act was expressly introduced “to permit access to community development, small business, minority development and any other public or private financial capital sources for investment in and financing of cannabis-related legitimate businesses.” The bill begins by providing a safe harbor to encourage this activity.
Saphira Galoob, Executive Director of the National Cannabis Roundtable, shares, “The CLIMB Act is critical because it provides state legal American businesses with traditional funding and support mechanisms for this emerging industry, which other domestic industries currently enjoy. The more financing sources available to cannabis businesses the better, particularly for entrepreneurs, small and minority-owned businesses that may otherwise face challenges in obtaining access to capital.”
In addition, the CLIMB Act provides a safe harbor for national securities exchanges, like the New York Stock Exchange, Nasdaq, and other securities market participants to list state legal cannabis operators that currently cannot list in the United States. 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, and the NYSE and Nasdaq will not list cannabis companies with U.S. operations because those operations continue to be illegal at the federal level. Because cannabis companies cannot list on U.S. exchanges, they 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 comes at a time when publicly traded cannabis companies are seeing red. Zagzebski notes, “Publicly traded cannabis companies are trading at or near all-time lows. Thus, the CLIMB Act, if passed, could be a welcome shot in the arm for the entire industry, because it would provide access to U.S. exchanges for qualifying companies, would significantly increase liquidity from institutional investors, and would likely provide buoyancy to the entire industry, even smaller operators.”
As I, along with other cannabis industry insiders, are eagerly awaiting progress at the federal level, particularly through the pending SAFE Banking Act, we will all be paying close attention to how this newly introduced CLIMB Act is received on Capitol Hill.
