I’ve got a quick update with some huge news for cannabis investors: Some of the clouds surrounding banking and marijuana-related companies have cleared.

That’s thanks to the recent end of a 40-month legal fight by Denver, Colo.-based Fourth Corner Credit Union to win favor with the Federal Reserve Bank of Kansas City.

On Feb. 2, the Kansas City Fed gave conditional approval to Fourth Corner Credit Union to launch its business catering to cannabis-related companies.

It’s easy to see the upside for companies in the legal cannabis sector. You and I take access to banking for granted, but that service was largely unavailable to these firms who’d been forced into a cash-only existence, with all the hassles that entails.

Banking still isn’t wide open… yet. But to understand exactly how important this is, let’s backtrack a little.

The Beginning of the End of “Financial Prohibition”

Shortly after California went fully legal, U.S. Attorney General Jeff Sessions rescinded the Cole Memo and paved the way for federal prosecutors to target marijuana businesses. Many investors panicked, but we kept our cool and were rewarded with plenty of gains and better-than-usual entry points for pot stocks.

The Cole Memo generally allowed states to implement their own cannabis laws without U.S. Justice Department interference, and, importantly, allowed banks to open accounts for some marijuana-related companies.

But Sessions’ move, while it didn’t deal directly with the banking issue, made some banks question whether they’d soon be on the receiving end of money-laundering charges, effectively making many legal cannabis companies consider once again working only in cash.

Obviously, that less-than-optimal setup lead to extra safety and financial risks for these firms, as congressional lawmakers from states like California, Colorado, and Washington have pointed out.

But for the first time ever, the Fed relieved some of this pressure by conditionally granting Fourth Corner the ability to serve its customers.

This is a big step in reaching the clarity we’re seeking as cannabis investors – though it’s not exactly a slam dunk.

Here’s what I mean by that.

The Political Will to Solve This Problem Is Firming Up

You see, only firms servicing the growers and dispensaries – think marketing, technology, or security – will be able to establish bank accounts at Fourth Corner. Per the Fed, companies that “touch the plant” are still left out in the cold, at least until more federal guidance is issued.

That could take some time, but the issue at the nexus of cannabis and banking is clearly top of mind for U.S. Treasury Secretary Steven Mnuchin.

He was on Capitol Hill recently, telling lawmakers on the House Financial Services Committee that he didn’t want to keep seeing “bags of cash” from cannabis companies floating around. “We want to make sure that we can collect our necessary taxes and other things,” he said.

Mnuchin said the U.S. Treasury Department hasn’t and won’t rescind the 2014 banking memo that’s allowed banks to open accounts for some cannabis-related companies.

These kinds of moves are going to make it easier for pick-and-shovel cannabis companies to do business – and drive upside for them, their clients, and their shareholders.

I think we’re entering a pivotal moment for pot stocks, which means it’s time to get into position in these pick-and-shovel companies, like Scotts Miracle-Gro Co. (NYSE: SMG), Microsoft Corp. (Nasdaq: MSFT), and others, that make it possible for growers to grow and dispensaries to dispense, with an eye toward the day when the banking question is finally and decisively settled.

So you know I’ll be watching out to see what happens next.

— Michael A. Robinson

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Source: Money Morning