The US House of Representatives Passes SAFE Act and Begins to Create a Path

The US House of Representa2ves Passes SAFE Act and Begins to Create a Path for Cannabis Businesses to Use Banks Like Everyone Else By: Keith L. Williams, Esq.

The House of Representatives passed the Secure And Fair Enforcement (SAFE) Banking Act (SAFE Act) today with a vote of 321 for versus 103 against—a significant margin. All Democrats but one voted in favor; Republicans were split 91 for and 102 against; one independent voted in favor. The bill prohibits federal banking regulators from penalizing a depository institution simply because the bank provides services to legitimate marijuana-related businesses (e.g., a cannabis grower, processor, and/or dispensary that is duly licensed by a state with an established medical and/or adult-use cannabis program). The bill also stops regulators from terminating or limiting deposit insurance for banks that serve cannabis or hemp businesses. The bill is significant for several reasons. First, this is the first standalone cannabis reform bill that has reached the House floor. Second, it was a true bi-partisan effort being sponsored by Rep. Ed Perlmutter (D-CO), Rep. Cory Gardner (R-CO). Third, this legislation would help address one of the cannabis industry’s primary challenges: Finding financial institutions that will take them on as customers. Even in states with robust medical and/or adult-use cannabis programs, banking op0ons are extremely limited (perhaps only one depository institution available in some states). This would be very beneficial to helping cannabis businesses manage all aspects of their finances from deposits to payments to taxes (for instance, one cannabis company CEO had to pay his $3 million federal tax bill in cash).

It would also reduce cannabis company costs since many banks that work with cannabis companies charge a premium for large cash deposits and everyone from the cannabis company to the bank to even the IRS office has to hire extra security to ward of predators who may be swayed by that level of cash. Fourth, once implemented, the bill could pave the way for commercial lending and capital markets opportuni0es for US-based green market entities. Lastly, many hemp businesses continue to struggle to gain access to financial services despite hemp being legal federally. Many are trying to remain positive as the bill moves toward considera0on in the Senate. Unfortunately for cannabis businesses, the Senate Majority Leader Mitch McConnell (R-Ky) has not yet signaled a willingness to take up the marijuana reform measure in the Senate, despite being a very strong proponent of hemp (hemp’s “illicit cousin,” as McConnell calls it). Additionally, progressive groups such as the ACLU or the Center for American Progress that seem to support legalization and normalization of cannabis may not support the bill unless it addresses more than just banking issues and provides more assistance to “communities who have felt the brunt of prohibition” and have been “shut out” of the growing industry. Some Senate Democrats have echoed that call, are signaling that their votes could be contingent on more comprehensive reform, such as a justice focused legalization bill. Odds makers are giving the bill a 33% chance (which is up from 20%) of having a companion bill pass through the Senate in 2019. The bill currently has 33 co-sponsors in the Senate, which means 1/3 of the chamber has formally signed on to the legisla0on. Of course, it remains unclear if President Trump would sign any version that reaches his desk, but let’s keep hope one of the few issues that can get both parties working together won’t be thwarted by the White House.