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Wednesday, Dec 8, 2021
Mugglehead Magazine
Cannabis & psychedelics industry news based in Vancouver, B.C.
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Analysis

After 8-year wait, SAFE Banking Act expected to pass

Major cannabis banking reform is likely to pass this year due to bipartisan support in U.S. Congress, but could face headwinds from concurrent legalization efforts

Washington DC Capitol dome detail with waving american flag

After the SAFE Banking Act was reintroduced Thursday for the eighth time in the United States House of Representatives, experts expect the major cannabis bill to pass this year but not without complications.

Banking reforms are a logical short-term solution before sweeping federal legalization measures move forward on Capitol Hill, says Chris Lindsey, director of government relations for the Marijuana Policy Project. However, the banking and legalization bills are seen by some Democrats as conflicting measures, which adds uncertainty to the timeline.

While the Democrat-run House passed the banking bill in 2019, it never gained traction in the Republican-controlled Senate.

The act would create safe-harbour protections for financial institutions that service state-legal cannabis businesses without federal interference until cannabis is descheduled. It would open up credit card transactions for pot companies that currently operate on a cash-only basis, which currently makes them more susceptible to theft.

In 2021, the bill has a greater chance of passing because cannabis banking has become a larger public-safety issue on both sides of the political aisle, Lindsey explains.

In the U.S., the Senate’s filibuster rules require 60 votes to end debate on most larger bills and allow the minority party to halt the majority’s efforts.

Democrats now hold 50 seats in the 100-seat Senate and only maintain control due to Vice President Kamala Harris’ tiebreaker vote.

Read more: US cannabis banking likely to come ahead of Senate legalization bill

Only some U.S. cannabis retailers offer credit card payments due to federal prohibition. Photo via Cova Software

Lindsey expects the bill will gain enough votes to pass both chambers this time. But he says it’s hard to predict when, because of uncertainty surrounding the development of two federal legalization measures that are seen as competing efforts by some Democrat lawmakers in Congress.

The MORE Act, which would remove cannabis from the federal Controlled Substances Act and erase weed-related criminal records, could be introduced next week in the House.

And Lindsey expects Democratic Senators Cory Booker, Ron Wyden and Majority Leader Chuck Schumer to table sweeping legislation in the coming weeks that would end federal prohibition of weed.

Some progressive Democrat lawmakers in Washington D.C. argue that legalization bills should be prioritized over banking measures because the latter don’t address social justice issues related to the decades-long war on drugs.

However, Lindsey counters that banking is an important stop-gap measure and not a replacement for legalization. The banking bill would also open up opportunities for frustrated equity licence applicants who can’t get loans to launch a cannabis business.

“The appearance of a one-or-other debate can undermine a process in which we need to allow for a transition,” Linsdey says.

Legal cannabis sales in the U.S. surpassed US$17.5 billion in 2020, according to data firm BDSA. Photo via Planet 13

Banking industry gets behind SAFE

The long-time marijuana advocate says the SAFE Act is gaining momentum due to major support from the banking industry.

On Wednesday, the American Banking Association sent a letter to members of the House Financial Services Committee calling on them to pass the bill this time around.

“Our member banks find themselves in a difficult situation due to the conflict between state and federal law, with local communities encouraging them to bank cannabis businesses and federal law prohibiting it,” the association wrote. “Congress must act to resolve this conflict between state and federal law.”

Democratic Rep. Ed Perlumtter, who authored and introduced a version of the bill during every Congress since 2013, says cannabis legalization has already swept across the U.S. so banking reform is inevitable.

He’s teamed up with the Independent Community Bankers Association, which was the first financial trade group to support the SAFE Banking Act. Because larger financial institutions have mostly shied away from servicing cannabis businesses, many local state-run credit unions and small banks have stepped in to take the risk.

Currently, 36 states have legalized cannabis for medical or adult use, while 47 states have passed hemp laws and allow CBD sales.

“The genie is out of the bottle and has been for many years. Thousands of employees and businesses across this country have been forced to deal in piles of cash for far too long, and it is the responsibility of Congress to step up and take action to align federal and state laws for the safety of our constituents and communities,” Perlmutter said in a statement. “The public safety need is urgent, and a public health and economic need has also emerged with the pandemic further exacerbating the cash-only problem for the industry.”

Top image via Deposit Photos

 

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