As readers of this blog and the cannabis industry are aware, the conflict between state and federal law on the issue of cannabis is a constant source of tension, struggle, and frustration for the cannabis industry, their employees, and those who provide services to the industry. Among the many sources of consternation is the unwillingness of many financial institutions to provide services to the cannabis industry given its illegal status under federal law. While most cannabis businesses have access to traditional business checking account services, they generally lack access to the full suite of financial products and services that financial institutions offer to all other businesses, such as business loans, lines of credit, commercial mortgages, etc.
For the last several years, it has appeared time and again that we might finally be on the precipice of cannabis reform, as the SAFE Banking Act has previously passed the House of Representatives on seven separate occasions on a bipartisan basis. However, all of those previous efforts stalled out and died in the Senate.
However, on September 20, 2023, the renamed Secure and Fair Enforcement Regulation (SAFER) Banking Act was reintroduced in the Senate with bipartisan cosponsors, Senators Jeff Merkley (D-OR) and Steve Daines (R-MT). The SAFER Banking Act is scheduled to receive a markup in the Senate Banking Committee on September 27, 2023—a key step before the bill can be brought to the Senate floor. The bill has received strong support from both sides of the aisle in the Senate, and it is a legislative priority for Senate Majority Leader Chuck Schumer (D-NY). Schumer has stated that he wants to “bring this legislation to the floor with all due speed.” Likewise, Daines has expressed confidence that the Senate has enough votes to pass the Act.
Given the support that this bill has with Majority Leader Schumer to bring this legislation to the floor for a vote, there is reason for cautious optimism that we may actually be on the cusp of meaningful federal cannabis banking reform. It remains to be seen whether there are 60 Senators who will support this bill to invoke cloture and bring the bill to a floor vote. If the bill passes in the Senate, it seems highly likely to pass in the House, as it has already done so on seven prior occasions.
Cannabis banking reform is long overdue and has been a point of bipartisan emphasis in Congress with further support coming from the cannabis industry, the financial sector, the insurance sector, and law enforcement. There are obvious security and safety concerns from operating a multibillion-dollar industry on a cash-only basis. Moreover, there have been recent stories highlighting the challenges that employees working in the cannabis industry face with respect to personal banking, loans, and mortgages.
The SAFER Banking Act would solve these issues and remove the threat of prosecution from major financial institutions, insurance providers, and other service providers to a state-legal cannabis business. This would greatly open up access to capital for existing cannabis businesses, increase competition and promote innovation in the cannabis marketplace, and ease some of the burdens for entry in the cannabis marketplace for small businesses or social equity operators.
The Dykema Cannabis Industry Group will continue to monitor and provide updates on this incredibly important piece of legislation. If you have any questions, please contact Lance Boldrey, John Fraser, or your Dykema relationship attorney.