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SAFE Banking: What is it & What Happens Next

Marijuana reform took a big leap forward last week with the U.S. House of Representatives passing the SAFE Banking Act. The bill, which would allow banks and financial institutions to service legal hemp and marijuana businesses, is the first cannabis-focused bill to reach a vote and pass in the House. While many anticipated the bill to pass the House vote, most did not expect it to receive the overwhelming support it did – landing 321 of the 424 total votes.

The federal status of hemp and cannabis has long plagued its’ business owners and prompted banks to steer clear of the industry almost entirely. For years, businesses in states with legalized cannabis have struggled to secure basic banking services, simply because it’s a legal gray area and bank’s feared repercussions. For instance, under the Bank Secrecy Act, financial institutions that fail to properly report transactions with MRBs – businesses selling marijuana and/or CBD – can be charged with money-laundering. Although improbable in most cases, the off chance of federal intervention has been enough for most banks to just say ‘no’

Enter The SAFE Banking Act

Notably, the SAFE Banking Act would permit marijuana related businesses to access lending and credit services, allow them to open bank accounts, and evolve beyond cash-only sales. Beyond the basics, the Act would also create clear guidance and distinct parameters for banks to establish cannabis policy for their own institutions. 

“Perhaps, most importantly, the Act will require the Federal Financial Institutions Examination Council (FFIEC) to develop uniform guidance and examination procedures for depository institutions serving cannabis-related businesses.” ~ National Law Review 

Today, less than 70% of cannabis business owners have a formal relationship with a financial institution, meaning that most are being banked under false pretenses and at risk of account termination. Conflicting state vs. federal laws and a lack of basic guidance when it comes to cannabis has in large part deterred any bank looking to enter the space from doing so. The SAFE Banking Act looks well-poised to change those tides, but the Bill’s biggest test still looms.

The Senate Vote

Passing the House vote is only half the battle. Although the Bill garnered a surprising number of bipartisan votes, its success in the House is largely attributable to the Democratic support it received. The Bill must now appease the needs of a tougher crowd in a Republican controlled Senate. 

Last Wednesday’s House vote saw an unprecedented level of bipartisan support, with 91 Republican members and all but 1 Democratic member voting “yea” on the Bill. Presumably, a big reason the bill continues to gain momentum is because it does not call for other, more broad marijuana reform laws. 

“It’s a problem that keeps coming up. I think you can be against marijuana and still understand that if it’s going to be a legalized product, we need to be able to control it through our banking system.” ~ Sen. Marco Rubio (R-Fla.)

Knowing your audience is key, and several House Republicans credited the Bill’s success to framing it as a piece of banking legislation, rather than marijuana legislation. A theory that already seems to be holding true, as some 37 House members formerly opposed to the bill voted in favor of it this go round. SAFE Banking advocates will look to take that notion a step further in the Senate, as they plan to let banking advocates take the spotlight in place of marijuana supporters. 

The SAFE Banking Act has clearly gained some traction with House Republicans, but it remains to be seen whether that will translate over to the Senate. A timetable for the Senate vote has not yet been released, but Mike Crapo, Chairman of the Senate Banking Committee, expressed his desire to hold the vote before the end of this year. So, like most things in the ever-changing world of cannabis, we’ll all have to wait and see what happens next. 

Follow SAFE Banking Act progress here, and check back next week for more updates!