House Takes First Step Toward Federal Validation of the Marijuana Industry: Votes 321 to 103 to Pass the SAFE Banking Act
In a showing of bipartisan support, the House of Congress voted 321 to 103 to pass the SAFE Banking Act. Of those voting yes, 229 were Democrats and 91 were Republicans. Unity amongst Democrats was particularly strong with only one Democrat vote being in opposition. Going forward, this overwhelming amount of party support should help assuage any fears as to whether the Democrats will continue to back the bill as it moves to Senate.
What the SAFE Act Means for the Industry
Currently, banks that provide services to the cannabis industry are at risk of being prosecuted under federal law. The risk is the same for insurance companies and landlords that operate in, or provide services to, the cannabis industry. Consequently, cannabis companies are often forced to horde cash and jump through hoops to make payment for items as simple as a utility bill; proper insurance coverage is often difficult to obtain; and options are limited for cannabis companies seeking to rent facilities for their operations. The lack of federal legalization has not only created several operational obstacles and inefficiencies for companies involved in the cannabis ecosystem, but by forcing cannabis companies to operate only in cash it has created safety issues for employees by making them, and their places of work, targets of robbery.
Although approval of the SAFE Banking Act would not fully legalize cannabis, it would prevent the federal government from taking action against banks, insurers and landlords that provide services to cannabis companies that are operating in compliance with applicable state laws. Not only would such legislation go a long way towards normalizing the industry, moving from a cash-only environment would significantly enhance public safety.
It should be noted that the bill does not contain provisions relating to capital markets access for cannabis companies. Accordingly, approval of the SAFE Banking Act would not provide cannabis companies with access to the U.S. capital markets or exchanges.
The next step is for the Senate to consider and vote on the SAFE Banking Act. This process is expected to occur later this year. While some are skeptical of the SAFE Banking Act’s chances of receiving approval from a Republican-controlled Senate, there are provisions in the bill that should appeal to Republicans. One provision addresses Operation Choke Point, a program put in place by the Obama administration that investigated banks for doing business with payday lenders, firearms dealers and other companies at higher risk for fraud and anti-money laundering. Another provision addresses access to banking services for the hemp industry, which should be of particular importance to Senate Majority Leader Mitch McConnell and his home state of Kentucky. If the bill is passed by Senate, it would then be submitted for Presidential approval.
Approval of the SAFE Banking Act will not fully legalize cannabis, but it would represent a significant milestone for the cannabis industry by providing access to banking services, and it could also lead to the approval of other cannabis focused policies, and possibly, full federal legalization.