At long last, the U.S. Senate has finally passed the SAFE Banking Act out of committee, renaming it the SAFER Banking Act. The Secure and Fair Enforcement Regulation Banking Act is landmark legislation designed to help give legally operating marijuana businesses access to financial services. Introduced by a bipartisan group of Senators, the recent vote moves the legislation out of committee and to the Senate floor for a vote and into the hands of a slim Democratic party majority.
Some form of the SAFE Banking Act has been floating around Capitol Hill since 2013. However, Congressional gridlock and partisan division always seemed to derail the efforts to pass the legislation. The passage of the SAFER Banking Act out of committee and into the hands of Senate Democrats may be the most significant progress for the cannabis industry up to this point.
What Is the SAFER Banking Act and What’s Changed?
The SAFER Banking Act is legislation aimed at giving legally operating marijuana businesses access to crucial services provided by financial institutions. The issue was that while marijuana sales were legal at the state level, they remained blocked at the federal level – and the banking industry’s federal regulations meant that it had to remain on the sidelines.
Traditionally, marijuana retailers in states that legalized medicinal and recreational cannabis needed to rely on a cash-only business model for transactions, payroll, and other services. Cash-only is currently the only way for retailers to conduct business because marijuana is still labeled a Schedule I illegal substance by the federal government. As a federally illegal substance, financial institutions could be severely penalized for conducting business with marijuana companies, even in states where cannabis is legal. Several studies and publications highlight how dangerous it is to run a cash-only business.
For years, the SAFE Banking Act was touted to extend access to financial services to legitimate cannabis businesses by repealing federal penalties levied on institutions choosing to conduct business with those in the cannabis industry. However, gridlock and partisan divisions largely kept the SAFE Banking Act on the sidelines, with no meaningful movement in passing legislation recently. Many Republicans criticized the SAFE Banking Act, saying it could allow illegal cannabis operations to use banks and financial institutions for money laundering. The Department of Justice also expressed concerns over relaxing regulations for financial institutions.
However, new hope is emerging as the Senate Committee on Banking, Housing, and Urban Affairs has voted 14 to 9 to move the SAFER Banking Act – a revised piece of legislation devised by a bipartisan group of senators – to the Senate floor for a full vote. The measure seeks to protect banks and other financial institutions that offer services to legal marijuana businesses. Those services can include bank accounts, small business loans, and other vital offerings long denied to those working in the cannabis industry. Supporters also say the measure could help make communities safer by giving cannabis businesses access to traditional financial services, eliminating the dangerous cash-only model that fosters robbery, burglary, and violence.
Different versions of the SAFE Banking Act previously passed the House seven times, but the legislation could never advance through the Senate. Provisions of the SAFE Banking Act were also excluded from a $1.7 trillion government funding bill passed to help avoid a partial federal government shutdown last year. The latest version, the SAFER Banking Act, extends legal protections to financial institutions and prevents federal banking regulators from ordering financial institutions to close an account based on “reputational risk.” Senators say that revised language in the SAFER Banking Act addresses both Democratic and Republican concerns over account terminations and the scope of federal regulator involvement.
What’s Next for the SAFER Banking Act?
The next order of business for the SAFER Banking Act is debate, followed by the Senate’s vote of the full. The landmark legislation is expected to pass the Democratic-controlled Senate, especially as the creators of the measure tout bipartisan cooperation in crafting the bill. If the SAFER Banking Act passes the Senate, it moves to the House. However, its fate in the contentious House remains to be determined, even though the House has passed similar measures.
Some analysts claim that the Republican-controlled House is souring on marijuana reform and the SAFER Banking Act. However, it may not be the language of the bill that’s the problem. Recently, the House has been plagued by Republican infighting and power struggles between House Majority Speaker Keven McCarthy and far-right Republicans. The fighting and power struggles between McCarthy and fringe Republicans continue to grow and have put the country at risk of defaulting on its financial obligations and potential government shutdowns.
Some worry that the SAFER Banking Act faces a tough path ahead in the House, where spiteful lawmakers could strike it down. It could also face an uphill battle by being used as a bargaining chip to pass other, less popular measures. Speaker McCarthy has little control over the House and may be unable to muster the votes needed to pass the crucial legislation even if he wanted to. Although Speaker McCarthy himself has voted against marijuana reform numerous times, he did previously support an earlier version of the SAFE Banking Act.
Although both sides seem to concede that the SAFER Banking Act is far from perfect and does not address all potential concerns, it is, by far, the best iteration of the measure to date with the most substantial chances of making it to President Joe Biden’s desk says the group of bipartisan Senators who drafted the legislation. Many in the cannabis and banking industries hope lawmakers can put aside their differences and come together to pass one of the most transformative pieces of legislation the cannabis industry has seen at the federal level.
While the SAFER Banking Act moving out of a Senate committee scores the marijuana industry a big win, the battle to secure support from financial institutions is far from over. If you want to follow this story or other cannabis-related news and events, bookmark Cannabutter Digest. Cannabutter Digest is your one-stop shop for news, recipes, and product reviews.