The SAFE Banking Act, also known as the Secure and Fair Enforcement Banking Act, is proposed legislation that aims to provide legal protection for financial institutions that work with cannabis-related businesses.
Currently, traditional financial institutions do not facilitate cannabis-related transactions due to marijuana’s federal illegality. Despite widespread support, the bill failed to pass in the Senate, leaving communities at risk of crime and cannabis businesses operating solely with cash from private investors.
What is the SAFE Banking Act and how will it effect the cannabis industry?
The SAFE Banking Act is a bill that was first introduced in the House of Representatives in 2019 and has since been passed in the House of Representative. It has not yet been passed in the Senate. The measure would prohibit federal regulators from punishing financial institutions for providing services to cannabis companies, their owners, and employees.
The bill would also clarify that funds obtained from state-regulated and compliant cannabis businesses would not be considered as proceeds from illegal activity. This would provide protection against federal liability for banks, insurers, and other financial institutions that work with such companies.
Currently, cannabis businesses are considered illegal under federal law and as a result, financial institutions are reluctant to provide services to these businesses. This includes basic banking services such as opening a bank account or taking out a loan. This lack of access to banking services creates several problems for cannabis businesses, including difficulties in paying employees, paying taxes, and managing cash flow.
The SAFE Banking Act would change this by providing legal protection for financial institutions that work with cannabis-related businesses. This would allow these businesses to access banking services, increasing their ability to operate in a more transparent and accountable manner. This would be a huge step forward for the cannabis industry as it would provide a level of legitimacy and stability to cannabis businesses, which would in turn increase their ability to grow and expand.
When is the SAFE Banking Act due to go into effect?
Currently, the SAFE Banking Act has not yet been passed by the Senate. It is expected to be reintroduced in the near future and could potentially be passed in the coming months. If it is passed, it would go into effect immediately.
In 2022, the SAFE Banking Act was close to being voted on in the Senate but ultimately did not pass during the lame-duck session. The bill had already passed seven times in the House, but the Senate did not give it a vote. The limited time available during the lame-duck session, where must-pass bills were prioritized, prevented the SAFE Banking Act from being passed as a standalone bill. Despite the efforts of supporters, the bill did not make it to the Senate floor due to a lack of time and competing priorities.
It is important to note that even if the SAFE Banking Act is passed, it would not change the federal prohibition of cannabis. The legislation would only provide legal protection for financial institutions that work with cannabis-related businesses.
How will cannabis businesses be effected by this legislation?
The SAFE Banking Act would effect all cannabis-related businesses that are operating legally under state laws. This includes growers, processors, distributors, dispensaries, and labs. These businesses would be able to access banking services that they are currently denied due to the federal prohibition of cannabis.
Despite this setback, some industry experts argue that the practical impact of the SAFE Banking Act would have simply formalized the existing, albeit limited, connections between financial institutions.
According to the Financial Crimes Enforcement Network (FinCEN), about 755 financial institutions are currently banking cannabis, but insiders believe the number is closer to 250.
The SAFE Banking Act legislation is crucial for the cannabis industry as it would allow these businesses to take advantage of standard banking services including loaning money for cannabis business to make capital expenditures to expand their operations. The SAFE Banking Act would increase the ability of cannabis businesses to operate in a more transparent and accountable manner. It is important for supporters of the cannabis industry to contact their representatives and urge them to support the SAFE Banking Act.