The bipartisan Secure and Fair Enforcement (SAFE) Banking Act, which remains stalled in the U.S. Senate, could help make a difference in ending the federal prohibition against cannabis, an almost $18 billion industry that continues growing as more states decriminalize it.
“The SAFE Banking Act won’t end cannabis prohibition by itself, but it’s a vital step on the path to legalization,” Steven Hawkins, CEO of the US Cannabis Council, told Financial Regulation News.
U.S. Rep. Ed Perlmutter (D-CO) in March 2021 sponsored his chamber’s version of the bill, H.R. 1996, which currently has 180 cosponsors. The U.S. House of Representatives on April 19, 2021, voted 321-101 to approve the bill, which generally prohibits a federal banking regulator from penalizing a depository institution for providing banking services to a legitimate cannabis-related business.
The U.S. Senate received the bill on April 20, 2021, for consideration and referred it to the Senate Banking, Housing, and Urban Affairs Committee, which is also reviewing the Senate’s version of the bill, S. 910.
Since then, there’s been no action on the bill and Rep. Perlmutter earlier this month announced that he won’t seek reelection. The congressman, who has represented Colorado’s 7th congressional district since 2007, has said he still plans to help push the SAFE Banking Act over the finish line.
“I feel optimistic about the path forward for the SAFE Banking Act and, more broadly, reforms to our federal cannabis laws,” said Perlmutter about the House-approved bill. “Congress needs to act in order to catch up with the will of the majority of voters across this county and to ensure we are reducing the public safety risk for our constituents and communities.”
Forty-seven states, four U.S. territories, and the District of Columbia — representing nearly 98 percent of the U.S. population — have legalized some form of recreational or medical marijuana, including CBD.
However, current law restricts legitimate licensed marijuana businesses from accessing banking services and products, including checking and depository accounts, which in turn has forced them to operate in all cash, according to Perlmutter’s staff.
And whenever businesses are known to operate in strictly cash terms, a serious public safety risk develops for communities by inviting theft, robberies and burglaries, his staff said.
“Cannabis businesses of all sizes struggle with conducting business almost entirely in cash,” agreed Hawkins. “It’s inefficient and a constant security risk. The last two years have seen a surge in crimes targeting dispensaries.”
The purpose of the SAFE Banking Act, in fact, is to increase public safety by ensuring access to financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such businesses, according to the bill’s text.
The bill also would state that proceeds from a transaction involving activities of a legitimate cannabis-related business are not considered proceeds from unlawful activity, according to the congressional record bill summary, and a depository institution would not, under federal law, be held liable or subject to asset forfeiture for providing a loan or other financial services to a legitimate cannabis-related business.
Additionally, the bill would provide that a federal banking agency may not request or order a depository institution to terminate a customer account unless the agency has a valid reason for doing so, and a reason may not be based solely on reputation risk, the summary says. Valid reasons for terminating an account include threats to national security and involvement in terrorist financing, including state sponsorship of terrorism.
“The legislation is a commonsense reform that extends standard banking services to regulated cannabis businesses,” explained Hawkins. “Many small and minority-owned cannabis businesses struggle with access to capital and basic services like checking and payment processing. Many large cannabis businesses have found effective workarounds, but they are costly and inconvenient.”
Speaking of minorities, many industry stakeholders and lawmakers, such as Senate Majority Leader Chuck Schumer (D-NY), think that cannabis reform also must be balanced by social equity measures. Hawkins agrees.
“An equitable cannabis industry is one that’s more prosperous and sustainable for all involved. We believe that advancing social equity isn’t just the right thing to do, it’s also smart business and boosts the long-term viability of cannabis,” he said.
By including social equity provisions, Hawkins said there would be guarantees that opportunity pathways to entrepreneurship exist for populations that have been “most harshly impacted” by past punitive cannabis policies. “Policies that support a diverse cannabis industry are critical to success,” he said.
While the House-approved SAFE Banking Act doesn’t include such provisions, per se, the bill would require the Comptroller General of the United States to carry out a study on the barriers to marketplace entry, including in the licensing process, and the access to financial services for potential and existing minority-owned and women-owned cannabis-related legitimate businesses, and to provide Congress with any regulatory or legislative recommendations for removing those barriers and expanding access to financial services.
Sen. Schumer reportedly wants to see greater social equity protections in the bill before agreeing to advance cannabis banking legislation, and Senate leaders also have said that comprehensive reform must come before banking. Both positions actually kept the SAFE Banking Act from being included in a larger defense bill that was under consideration in the Senate.
“The narrative has begun to change around the SAFE Banking Act as more people come to understand that lack of banking access is a public safety risk and undermines social equity,” Hawkins said. “We were inspired by the groundswell of support last year for banking reform from all corners of our society and economy — ranging from the realtors association to the food workers union.”
Hawkins added that the US Cannabis Council (USCC) is also “pushing aggressively” to advance criminal justice reforms in Congress and by President Joe Biden.
“Specifically, we strongly support the HOPE Act, a bipartisan bill that would facilitate expungement of state and local cannabis offenses,” he said. “We are also urging the president to make good on his campaign pledge to issue a blanket pardon for federal cannabis offenses.”
The Health Opportunities to Promote Equity (HOPE) Act, H.R. 4236, would require the U.S. Department of Health and Human Services, when awarding grants to train low-income individuals to work in certain healthcare occupations, to make certain efforts to ensure the geographic diversity of grant recipients, according to the congressional record bill summary. The bill was introduced last June by U.S. Rep. Bill Pascrell, Jr., (D-NJ) and remains under consideration in the House Ways and Means Committee.
Additionally, USCC plans to actively engage with the Booker-Wyden-Schumer reform proposal in the Senate, Hawkins said, referring to comprehensive cannabis reform legislation that will be formally introduced by Sen. Schumer and U.S. Sens. Cory Booker (D-NJ) and Ron Wyden (D-OR).
Being circulated as a discussion draft currently, the Cannabis Administration and Opportunity Act proposes to end the federal prohibition on cannabis by removing it from the Controlled Substances Act, and would designate the U.S. Food and Drug Administration as the lead federal regulator of the manufacturing and marketing of cannabis products, with regulatory oversight help from the Alcohol and Tobacco Tax and Trade Bureau and the Bureau of Alcohol, Tobacco, Firearms and Explosives.
Among numerous other provisions, the proposal also addresses the impact of the War on Drugs through expungement, resentencing, opportunity trust fund programs, and Small Business Administration programs, the Senate draft says.
“We look forward to a substantive conversation in the Senate about how to best legalize and regulate cannabis at the federal level,” said Hawkins.