The Cannabis SAFE Banking Act, which in full is the Secure and Fair Enforcement Banking Act, is the latest act that has been passed by the House designed to protect both cannabis businesses and institutions who provide banking services to cannabis businesses. 

The SAFE Banking Act was actually first introduced in 2017 and although some subsequent versions of the Act have passed the House, they did not pass the Senate and simply died. However, the SAFE Banking Act of 2021 looks to be different, passing the House by a vote of 321 to 101 on the 19th of April, 2021. What is different about the SAFE Banking Act of 2021 is that it appears to have strong bipartisan support which may carry it through the Senate successfully.

What is the SAFE Banking Act of 2021? 

The 2021 version of the SAFE Banking Act, if it passes the Senate and is then signed off by president Joe Biden, would essentially prevent federal banking regulators from punishing financial institutions for doing business with cannabis companies. It will also prohibit federal regulators from discouraging financial institutions from doing business with cannabis companies, and will prevent the federal government from classifying revenue generated by legitimate cannabis businesses as proceeds from unlawful activity. 

This type of action is needed because even when cannabis has been legalized at the state level, financial institutions who give their services to cannabis businesses can still be punished on the federal level by federal banking regulators, since cannabis remains a Schedule 1 controlled substance at the federal level.

Many financial institutions who do business with cannabis companies risk punishment at the federal level in the form of having their deposit insurance or share insurance limited or completely terminated. If this were to happen to a financial institution, they would be exposed to massive losses should they experience hardship and fail as a financial institution, and their customer’s accounts would likewise not be insured, putting their money at risk as well.

The goal of the SAFE Banking Act of 2021 is to ensure that federal regulators no longer have the power to punish financial institutions who support the cannabis industry when cannabis has been legalized in a particular state. Should it pass the Senate, both financial institutions and cannabis businesses can rest assured knowing that they will not be losing their deposit insurance or their share insurance, while cannabis-related businesses will be able to enjoy improved access to loans from financial lenders. 

By removing the proceeds generated by legitimate cannabis businesses from under the umbrella of “proceeds from unlawful activity”, cannabis businesses won’t be subjugated to such heavy taxes under the IRC Sec. 280e tax code which has previously meant that cannabis businesses have had to pay more than double the amount in taxes compared to legitimate, non-cannabis businesses. This would then likely go on to lower the overall prices that cannabis consumers pay whenever they purchase cannabis, since the operational costs of cannabis businesses will be significantly reduced.

Who introduced the bill? 

The SAFE Banking Act, when it was first introduced in 2017, was sponsored by democratic senator Jeff Merkley of Colorado and democratic Rep. Ed Perlmutter. This time around, the 2021 act is once again sponsored by Perlmutter in the House and Merkley in the Senate, along with republican senator Steve Daines of Montana.

While the 2017 SAFE Banking Act made it through the democrat-controlled House, it didn’t make it through the republican-controlled senate then. The 2021 bill, however, is expected to have much better chances of making it through as there is much more support for it on both sides of government. Additionally, a large number of organizations, from the American Bankers Association to banks such as Wells Fargo, HSBC North America, Nationwide, Prudential, and even PayPal have all expressed their support for the bill. The American Bankers Association which represents the US banking industry, went as far as to testify before congress in support of the bill.

What has given lawmakers more confidence that the SAFE Banking Act of 2021 will pass the senate is the growing support from members of the republican party, with republican senator Pat Toomey of Pennsylvania, and other republicans, expressing a willingness to work on the bill. During the House debate, only one representative voted in opposition, that being Rep. Patrick McHenry of North Carolina.

Will the 2021 SAFE Banking Act pass the Senate? 

The growing amount of support for the SAFE Banking Act in both the democrat and republican parties is a promising indication that it is going to pass the senate. However, even if it does make it through, there is a chance the president Joe Biden will not sign it. This is a worrying possibility, since Biden has in the past proven to be slow to act regarding the decriminalization and legalization of cannabis and has even indicated that he does not support the legal use of cannabis, although he does support a state’s right to implement their own cannabis laws.

It is still currently unclear as to when this bill will be introduced to the senate although it will be sometime soon, and the current senate majority leader Chuck Schumer has proven to be a supporter of the federal legalization of cannabis although he has criticized the SAFE Banking Act for not being broad enough. Schumer and other senators actually intend on introducing a federal legalization bill to the senate floor which may come into conflict with the SAFE Banking Act, although their federal legalization bill looks to cover many of the things that would be covered by the SAFE Banking Act even though it has not been released at the time of writing this article. 

Schumer, while in an interview with Marijuana Moment, even suggested that the SAFE bill may be combined with the federal legalization bill in order to get it to the senate floor.

Even though there still looks to be some hurdles that the SAFE Banking Act will need to overcome before it becomes law, it currently has more support than in previous years. Should it become a part of the law, it will drastically transform the landscape of the legal cannabis industry by protecting financial institutions involved in the cannabis industry, and by giving cannabis businesses easier access to funds with the benefit of reducing the excessively high taxes that cannabis companies are currently paying.

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