The proposed legislation would provide key legal protections to financial institutions that work with cannabis companies — here’s what you need to know about the SAFER Banking Act.
Recreational cannabis is legal in nearly half the country — click here for the full list — while medical usage is allowed in almost three-quarters of US states and territories. Since weed is still federally illegal, however, banks and other financial institutions aren’t immune to prosecution at the national level if they provide services to businesses that sell cannabis given its status as a DEA Schedule I controlled substance. As a result, these companies have been forced to operate based on cash even in states that have legalized cannabis medically and recreationally, adding strain and risk to continued operations within a burgeoning industry.
That’s where the SAFER Banking Act comes in, proposed federal legislation that would allow legal cannabis companies to open accounts, make deposits, get insured, and conduct other important services with such financial institutions.
The bill, first introduced by Sen. Jeff Merkley (D-Oregon), passed the Senate Banking Committee last week by a 14-9 vote and will be heard on the Senate floor Monday, Oct. 2 for the first time since previous versions of the law were first discussed in 2015. The Secure and Fair Enforcement Regulation Banking Act, as it’s officially known, received bipartisan support at the committee level, with Republicans Cynthia Lummis of Wyoming, Steve Daines of Montana, and Kevin Cramer of North Dakota joining the Democrats’ majority in favor.
We’ve got momentum on our side to finally pass the SAFER Banking Act. Today, @SenateBanking voted on and PASSED this bill out of committee for the first time, a crucial step toward making it the law of the land. Let’s get this done to protect our legal cannabis businesses! https://t.co/rVvYOBhMcB— Senator Jeff Merkley (@SenJeffMerkley) September 27, 2023
“Dealing only in cash stifles these businesses’ growth, opens them up to so many risks, makes them easy targets for theft, robbery, and other crimes,” Senate Majority Leader Chuck Schumer (D-New York) said of the need for the SAFER Banking Act. “No industry has the ability to thrive if they can’t access banking infrastructure, especially not an industry that’s growing as quickly and is as new as the cannabis industry.”
Merkley told CNN that while some credit unions offer services to cannabis companies in his state, where legal weed is a $1 billion a year industry, fees have to be much higher than they’d charge other companies, calling the entire arrangement an enormous inconvenience. Senators will now have the chance to offer amendments to a bill that would help small businesses across the country, though Merkley said he’s uncertain whether big Wall Street banks would do business with cannabis companies if a bill was passed.
Of course, any bill passed by the Senate would also have to earn similar approval from the Republican-led House of Representatives. While House Majority Leader Kevin McCarthy has voted yes for past versions of the bill, he’s yet to signal which way he’d vote if the SAFER Banking Act came before the House.
It’s additionally unknown whether a federal banking law such as this one would present any implications for federal cannabis legality as such, or whether cannabis businesses are to be forced to pay taxes on their gross revenue as opposed to their net revenue, the latter of which would greatly assist these companies in their efforts to remain solvent and stable as the legal cannabis business puts down roots nationwide.
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