Cannabis Banking Legislation Put on Hold

The SAFE Banking Act was stripped from the National Defense Authorization Act

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Right now, because marijuana remains illegal at the federal level, companies involved in the cannabis industry where the product is legal locally face huge problems with their banking systems. Most banks won’t get involved for fear of losing FDIC and NCUA insurance; in some cases, the banks could even face federal prosecution and simply aren’t willing to take the risk. That leaves cannabis businesses to do their business dealings in cash – even paying their taxes to the federal government in wads of bills.

A bill that would change all that, granting protections for banks that choose to operate with cannabis retailers, has been in the works for years now. It’s called the SAFE Banking Act – an abbreviation for “Secure and Fair Enforcement Banking Act.” 

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After passing in the House, it was attached to a congressional defense bill, but has just been removed, leaving the Act dead in the water. 

“I’m disappointed #SAFEBanking is not included in the NDAA bill text,” wrote Representative Ed Perlmutter on Twitter. Perlmutter is a Democrat representing the 7th District of Colorado, and he’s the one who introduced the SAFE Banking Act back in March of 2021. “The Senate insists on burying its head in the sand and deny every opportunity to reform our outdated cannabis laws to align state and federal law to improve public safety.”

Rep. Perlmutter filed an amendment to the NDAA during a Rules Committee hearing to try to add the SAFE Banking Act back to the bill. Ultimately, though, he did not demand a vote on the issue. 

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He did vow, however, to “pursue every possible avenue” to get the bill signed into law. The Congressman said in a statement,

“As has been the case with cannabis reforms nationally, progress takes time but the will of the people will prevail. I thank my colleagues in the Rules Committee for their support and commitment today to pass this legislation. Including the SAFE Banking Act in the NDAA process resulted in increased awareness and attention to this important problem. That said, people are still getting killed and businesses are still getting robbed because of a lack of action from the Senate. The SAFE Banking Act has been sitting in the Senate for three years and with every passing day their unwillingness to deal with the issue endangers and harms businesses, their employees, and communities across the country.”

Why the SAFE Banking Act is necessary

There are plenty of reasons why running an all-cash business is not ideal. Those who put money into a bank that they got from a business involving cannabis can be charged with money laundering. The need to deal in all cash also runs the risk of attracting shady dealers who intend to use the business to launder money.

Having so much cash on hand also opens businesses up to theft. In Denver in 2013-2014 for instance, 50% of all cannabis businesses were robbed. Business owners also say they simply feel dirty and lesser by being forced to pay their bills, taxes, and payroll in cash. 

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The SAFE Banking Act would stop federal banking regulators from penalizing banks for doing business with legitimate entities in the cannabis industry. The bill specifies,

“A federal banking agency may not request or order a depository institution to terminate a customer account unless (1) the agency has a valid reason for doing so, and (2) that reason is not based solely on reputation risk. Valid reasons for terminating an account include threats to national security and involvement in terrorist financing, including state sponsorship of terrorism.

Finally, the bill decreases the cap on the surplus funds of the Federal Reserve banks. (Amounts exceeding this cap are deposited in the general fund of the Treasury.)”

History and Context for the SAFE Banking Act

The SAFE Banking Act has been in the headlines for years. The bill was introduced in March of 2019. The next month, Wikileaf reported on the House Financial Services Committee voting 45 to 15 to 15 to allow the legislation to move forward.

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“This comes after a hearing back in February in front of the Subcommittee on Consumer Protection and Financial Institutions. At this hearing, cannabis retailers, the banking industry and law enforcement representatives all gave testimony in support of allowing the cannabis industry to participate in the federal banking system,” that report in The Stash explained. 

In October of 2020, Wikileaf reported that the SAFE Banking Act was “on life support” after then-President Trump nixed a bipartisan stimulus package which happened to include the Act. The Cannabis Law Report praised that article as “hit[ting] the nail on the head” when we described the bipartisan bill as being “foiled by election gridlock.” 

In late September of 2021, Wikileaf reported on the House of Representatives once again passing the SAFE Banking Act (in this instance, for the sixth time), sending the legislation up to the Senate. The lower house of Congress supported the bill 321 to 101, with support of every single Democrat and over half of House Republicans.

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A budtender weighing cannabis buds from a glass jar

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“Enactment of the SAFE Banking Act would improve public safety and business efficiency in the 36 states that currently permit some form of retail marijuana sales,” said NORML Political Director Justin Strekal at the time. “The Senate should ensure this provision remains in the final version of this funding package and approve it swiftly.”

Things seemed like they were on the up and up. But before cannabis retailers could breathe in a puff of weed and let out a sigh of relief, the Senate seemed to put a nail in things – at least temporarily. Senate Democrats, as well as the Drug Policy Alliance, said they wanted to focus on passing larger, more comprehensive cannabis legislation that would legalize the product at the federal level before they focused on banking in the places marijuana is already legal. 

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Rep. Perlmutter has slammed Democrats like House Speaker Nancy Pelosi (D-CA) and House Majority Leader Chuck Schumer (D-NY) for their abandonment of the bill, criticizing the order of their priorities. He isn’t alone in that viewpoint. Rep Adam Smith (D-WA), who has been a major player in the negotiations of the NDAA, called the SAFE Banking Act’s failure to move forward “incredibly dangerous.”

The Chairman of the Rules Committee, Jim McGovern (D-MA) also said Schumer is “making it very difficult for a lot of small business – and minority-owned businesses” to expand. 

From there, the House chose to amend the National Defense Authorization Act to tack on SAFE on, which is where the Act ran into its most recent trouble.

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