On May 12, nearly a quarter of the U.S. Senate signed onto a letter to Congressional leaders, urging them to attach The Secure and Fair Enforcement (SAFE) Act to a large-scale manufacturing bill that is expected to pass the Senate in the coming months, according to Worcester Magazine. While it was passed in the U.S. House of Representatives on April 19, 2021, it has not been passed in the U.S. Senate.
“The SAFE Banking Act generally prohibits a federal banking regulator from penalizing or otherwise discouraging a depository institution for providing bank services (e.g. depository account services or loans) to legitimate cannabis-related businesses,” Sean Coyle, a partner at Fox Rothschild, said. “The proposed Act also provides that proceeds from a transaction involving activities of a legitimate cannabis-related business are not considered proceeds from unlawful activity. Currently, because cannabis remains illegal under federal Controlled Substances Act, financial institutions providing banking services to licensed cannabis businesses under state laws are subject to criminal prosecution under multiple federal statutes, including, but not limited to, anti-money laundering laws.”
Providing More Opportunities for Cannabis Dispensaries
The passing of this bill would provide a strong signal to the financial industry that it is now safe to do business with cannabis industry players. Josh Glasstetter from the US Cannabis Council says that this would be critical for retailers because this would expand banking opportunities and options for a broad range of cannabis businesses — not just for large companies, but also for individual dispensaries.
“Perhaps not immediately, but there is a strong argument to be made that passing the SAFE Act will expand payment options for customers at the dispensary level and could lead to widespread credit card availability,” Glasstetter said. “There is a lot of momentum around this right now, with a number of members of Congress in both the House and Senate working hard to ensure the final version of the bill includes safe banking.”
Additional Business Growth for Banks
Not only would the SAFE Banking Act benefit cannabis retailers, but it would also benefit banks. According to Coyle, this would allow federally regulated banks to service clients it is otherwise effectively prohibited from servicing, which means more potential customers for loans and depository services. Banks would also be able to participate in an industry that produces a meaningful amount of dollars, and will only continue to grow as more progress is made.
Federal Legalization vs. the SAFE Act
Between the federal legalization for marijuana and the SAFE Banking Act, there is a lot going on in the industry. While federal legalization would have more of a significant impact, Coyle believes that the Banking Act is a crucial step towards solving the problems facing cannabis licenses and retailers as a result of the federal prohibition of marijuana.
“SAFE Banking would allow retailers to have access to additional sources of funding at market rates, when currently the above market rates are normal for cannabis, which is a significant hurdle in the path to profitability or survival,” Coyle said. Even though the Banking Act would not solve all of the problems caused by federal prohibition, such as 280E, it would still be a huge step forward to regulating the market and making it beneficial for everyone involved.