SAFE Banking Act 2023-2024 and its impact on the Cannabis Industry

The SAFE Banking Act of 2023 is a bill that aims to create protections for financial institutions that provide services to state-sanctioned marijuana businesses and service providers for such businesses. As of now, the current status of the SAFE Banking Act of 2023 is that it is still pending in the Senate Committee on Banking, Housing, and Urban Affairs, which held a hearing on the bill on May 11, 2023. The committee has not yet voted on whether to report the bill to the full Senate for consideration. Therefore, it is uncertain when or if the bill will be signed into law by the President. Some experts suggest that the bill may have a better chance of passing if it is attached to a broader cannabis reform legislation, such as the MORE Act or the CAOA, which would address the federal legalization or decriminalization of marijuana.

The goal of the bill is to provide the cannabis industry with access to banking without fear of penalties or high fees. It states that financial rules must adjust with marijuana laws so that businesses are treated equally. As a result, workers would no longer need to conduct business in cash. They would be able to show proof of employment, get mortgages and so on. The bill has bipartisan support, but also some opposition from both parties.

This is a nationwide issue. Days after recreational cannabis became legal in Maryland, dispensaries across the state continue to see record sales. The Maryland Cannabis Administration reported – – ¹: Maryland dispensaries sold over $87 million of cannabis products in first month of legalization, regulators say – $10.4 million in sales over the Fourth of July weekend. It has become critical to provide safe banking access to the Cannabis Industry.

The low-hanging fruit for the Cannabis Industry.

How would this bill affect the cannabis industry?

Without access to traditional banks, legal marijuana businesses can’t access loans and capital, or even use basic bank accounts. This bill could affect the industry in several positive ways. Some of the potential benefits are:

• Reduce safety risks of dealing with cash-only, which makes cannabis businesses vulnerable to theft, fraud, and violence.
• Increase the access to capital and credit for cannabis businesses. Small and minority-owned enterprises face difficulties in obtaining financing.
• Improve the transparency and accountability of the cannabis industry. This can be done by enabling financial institutions to track, report and comply with anti-money laundering laws.
• Stimulate the growth and development of the cannabis industry and its related sectors, such as real estate, by creating more opportunities for investment, acquisition, leasing, and expansion of cannabis properties.

“Without full access to the banking and payments system, legal cannabis businesses are forced to operate in the shadows,” said Sen. Sherrod Brown, D-Ohio.

Sen. Tim Scott, R-S.C., said: “Congress has a responsibility to ensure all legal industries have access to financial institutions and services.”

What are some of the drawbacks or challenges for this bill?

• It does not address the underlying issue of federal prohibition of cannabis, which still exposes cannabis businesses and consumers to legal risks and uncertainties.
• It could create loopholes for money laundering and other illicit activities, if not properly regulated and enforced.
• It faces political opposition and delays in the Senate, where some lawmakers prefer a more comprehensive approach to cannabis reform or are opposed to legalization altogether.

What’s on the horizon for the Cannabis Industry? Photo by David Gabrić from Unsplash.

A more comprehensive approach to Cannabis Reform

This would involve not only addressing the banking and financial issues, but also:

• Removing cannabis from the federal list of controlled substances and expunging past convictions for nonviolent cannabis offenses.
• Establishing a federal regulatory framework for the production, distribution, and sale of cannabis, with oversight from agencies such as the Food and Drug Administration and the Alcohol and Tobacco Tax and Trade Bureau.
• Creating a federal tax system for cannabis revenues, with provisions for reinvesting in communities harmed by the war on drugs and supporting research, education, and public health programs related to cannabis.
• Respecting the rights of states to set their own policies regarding cannabis legalization and regulation, while ensuring compliance with federal standards and preventing interstate trafficking.
• Promoting social equity and justice in the cannabis industry, by providing access to capital, licenses, and opportunities for small businesses, minority-owned businesses, and individuals disproportionately affected by cannabis prohibition.

The SAFE Banking Act has cleared the House with support from both parties on six occasions already but has hit a wall, so to speak, in the Senate. Hopefully this is the year the legislation finally makes some headway. This is the way.

This is the way