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The SAFE Banking Act: What Is It And Where Does It Stand?

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This fall, the U.S. House of Representatives passed the Safe and Fair Enforcement (SAFE) Banking Act for the fifth time since it was first introduced by Representative Ed Perlmutter (D-CO-7) back in 2013. This time, the bill was passed as part of the National Defense Authorization Act (NDAA).

The bill, which has received bipartisan support each time it’s been introduced – and which passed the House of Representatives with overwhelming bipartisan support in April by a vote of 321 to 101, earning backing from 106 Republicans – would make a number of important changes to the regulations which guide how banks across the nation choose to serve (or not to serve) legitimate cannabis-related businesses in states that have legalized its use for medical or recreational purposes.

It’s fair to ask, though, why this bill has failed to make it to President Barack Obama, President Donald Trump, or President Joe Biden’s desk despite passing the House five times over eight years. What gives it such strong support, and why has it stalled in the Senate despite that?

Let’s uncover how it’s been stalled from becoming a law and how it would change the cannabis industry.

1)   What is the SAFE Banking Act, and what does it do?

The primary purpose of the SAFE Banking Act is to protect banks and financial institutions who choose to service cannabis-related businesses operating within their state’s legal and regulatory frameworks.

Right now, cannabis is still listed as a Schedule I drug by the U.S. Drug Enforcement Agency, meaning that banks could face penalties from federal regulators for serving legitimate businesses in states that have legalized uses for cannabis. As a result, many cannabis-related businesses have had to resort to a cash-only model, which leaves them susceptible to theft, fraud, and violent crime.

The SAFE Banking Act would explicitly prohibit federal regulators from handing down penalties on banks who serve legitimate businesses, meaning that they could operate with safer, more trustworthy financial practices rather than relying entirely on cash. 

2)   What do proponents of the bill say about it?

One of the primary benefits of the bill, as described by Rep. Perlmutter, is that it allows entirely legal, legitimate businesses to access important financial services like a checking account, while also making it easier for them to accept alternate forms of payment like credit or debit cards.

Beyond that, SAFE Banking Act supporters point to the inherent risks of businesses in one of the country’s fastest-growing industries operating on a cash-only model. Being cash-only makes those businesses more susceptible to theft and fraud, and in some cases even violent crime.

Proponents argue allowing financial institutions to serve these companies without fear of federal penalties will make it safer for cannabis-related businesses to operate. In addition, given that states across the country use track-and-trace systems like the one offered by Metrc to closely monitor legal cannabis, financial institutions can rest easy knowing the market is closely monitored at every stage.

These are points that were recently echoed by governors from across the nation, when Colorado Governor Jared Polis (D) was joined by a bipartisan group of 23 other governors in sending a letter to congressional leadership urging the passage of the SAFE Banking Act as part of the NDAA. They also highlighted that financial institutions “will subject the funds and account holders to rigorous anti-money laundering and ‘Know Your Customer’ requirements” to ensure the system remains secure.

Despite the fact the bill has not passed the Senate to date, it is not without supporters in the chamber. The SAFE Banking Act currently has a bipartisan 40 cosponsors in the Senate.

3)   What are the obstacles?

Lawmakers deterring the SAFE Banking Act’s passage in the Senate generally fall into a few buckets. More progressive lawmakers do not oppose the bill’s intentions on a policy level, but rather have convictions on how cannabis policies pass. They view the SAFE Banking Act as just one piece of a larger legislative puzzle in creating a safe cannabis market, and prefer to prioritize broader and more comprehensive legalization efforts.

In another camp are a handful of conservative lawmakers who have longstanding concerns and skepticism about the industry in general.

Taken together, this has prevented the SAFE Banking Act from clearing the final hurdle in the Senate and becoming law.

4)   What does the future hold for the SAFE Banking Act?

The future of the SAFE Banking Act in the Senate remains unclear, but all is not lost for its potential to finally get passed as part of NDAA. Rep. Perlmutter has done his part by including the SAFE Banking Act in the House version of the NDAA. The House NDAA will be merged with the Senate NDAA, presumably in the coming weeks. It is critical the SAFE Banking Act is kept in the final NDAA bill.   

I had the chance to talk with Rep. Perlmutter’s office, and he had this to say:

“The SAFE Banking Act is the best opportunity to enact some type of federal cannabis reform this year. By including the SAFE Banking Act in the final NDAA, we can safeguard our financial system, reduce the public safety risk in our communities, and help support Veteran and minority-owned businesses now. Enacting SAFE Banking is just the tip of the iceberg and it will help break the logjam and pave the way for broader, comprehensive cannabis reform and create a safer and more equitable industry.”

The final passage of the SAFE Banking Act bill would mark a significant milestone in the industry and provide a welcome layer of certainty for cannabis-related businesses across the nation.

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