The legislation, which would provide a safe harbor for financial institutions that work with cannabis business clients, may be back on the table in the coming weeks, however, as members of Congress look to include a revised version of the proposal in the next COVID-19 stimulus bill.
Lawmakers argue that many medical cannabis patients are at increased risk of contracting the coronavirus, and forcing them to purchase products in cash could also put dispensary employees at risk, according to an NJ.com report.
“There is no positive in having cash outside of the banking industry for the safety of our employees and facility, but also no positive for the economy either,” said Michael Sassano, founder and CEO of Solaris Farms, a Las Vegas-based cultivation facility.
For Sassano, the federal government’s focus should first be on its response to the COVID-19 crisis, but after the immediate threat is behind us, he would like to see a more comprehensive legalization effort at the federal level, which would not only address banking reform, but would also alleviate the rest of the federal-state tension that has long plagued the industry.
“Cannabis is the fastest growing employment industry in America and will help as the USA comes out of this economic downturn,” Sassano said.
Others in the industry seem to echo this sentiment.
“It would be great to have our longstanding financial challenges resolved in the pandemic response, but equally important—and even more urgent—is that businesses in the legitimate, state-licensed, regulated market have access to the same tools and opportunities that every other business in America has been given,” said Chris Fotopoulos, EVP and chief legal officer for Verano Holdings, a cannabis company and owner of one of the largest privately held MSO facilities in the country. “We’re all employers, we all invest in our local communities, and if the goal is to keep jobs, businesses and supply chains intact, the licensed cannabis industry and our suppliers and vendors need access to the same resources to confront this unprecedented economic situation.”
U.S. Rep. Ed Perlmutter (D-CO), the SAFE Banking Act’s primary sponsor, is not only leading the charge to include its provisions in a forthcoming stimulus bill, but has also been pushing to extend Small Business Administration (SBA) loans to the cannabis industry, which has so far been barred from accessing SBA aid.
“Ideally, the main aspects of the SAFE Banking Act would be included [in an upcoming stimulus bill] to allow cannabis companies more traditional banking access,” said Jeffrey M. Zucker, co-founder and president of Green Lion Partners, a cannabis-focused business strategy firm based in Denver, Colo. “Additionally, the hope is that cannabis companies will be given access to some of the COVID-19 relief packages. At the very least, removing the restrictions on relief for ancillary companies would be a tremendous start.”
While Green Lion Partners has banking access as an ancillary business, Zucker said relief from the federal government would allow his company to retain its employees in a time when it is increasingly difficult to maintain staff and continue normal operations.
These efforts would also help normalize the industry and could nudge lawmakers in the direction of larger policy reform, Fotopoulos added.
“If we could get acceptance that the small businesses of the legal, regulated cannabis industry should get access to the same economic lifelines being provided to every other business in America, that would be a huge win for the industry,” he said. “That step would provide momentum and help build bipartisan support as we continue working on the larger regulatory issues that need to be resolved.”
For Verano Holdings, banking reform means increased liquidity and financing options that would allow the company to invest more capital in its business, team members and retail outlets.
“There is a tremendous loss of time and resources based on the inefficiencies created by these regulatory roadblocks,” Fotopoulos said.
The renewed focus on banking access comes at a critical time for the industry, he added, as multiple states explore ways to address social equity and provide opportunities to those disproportionately impacted by the war on drugs.
“[The lack of banking services] has cost the existing industry a ton of time, professional services and increased startup expenses,” Fotopoulos said. “[Policy reform] would benefit the industry and the social justice policies that states are enacting, if the next generation of businesses didn’t have to endure that experience.”
A new wave of licensees with increased access to the banking and credit markets would offer entrepreneurs the chance to really capitalize on the expanding legalized market, he added.
“We need to continue emphasizing that these responsible regulatory reforms improve safety and transparency of the financial system, while strengthening our host communities and helping a new generation of entrepreneurs create businesses, open storefronts and hire workers,” Fotopoulos said.
It remains to be seen whether cannabis banking provisions have the support they need to gain approval in any sort of forthcoming federal relief packages, but Fotopoulos is encouraged by the increasing acceptance of cannabis as more state adopt legal programs.
“Everything is fluid, so we’re really watching like everyone else,” he said. “We appreciate what our supporters in Congress are doing on behalf of the industry [and] our employees, suppliers and vendors.”
“I think it will be difficult, but representatives of legal cannabis states are doing a great job pushing for approval,” Zucker added. “That said, cannabis is of course controversial for many legislators. After all of the pushback, though, I believe there is a solid chance that some portion of their requested inclusions will make it into a final stimulus package.”
If and when cannabis banking reform makes it across the finish line, companies must ensure they are prepared to transition from a cash-only to a banked business.
“It’s important for existing cannabis companies without banking access to ensure they have a thorough understanding of their finances at all times, and especially as they hopefully transition to traditional banking,” Zucker said.
Now is a good time for companies to ensure they have tracking and compliance procedures in place, he added, as well as software that helps maintain those procedures. In addition, cannabis businesses should be considering self or third-party audits prior to transitioning to banking, Zucker said.
The companies that gain easy access to capital and credit are those that demonstrate compliance and model the best practices of operating a business in a tightly regulated industry, Fotopoulos added.
“Live by your culture of compliance day-in and day-out,” he said. “Operating a cannabis-related business isn’t a right, it’s a privilege, and we all have to be good stewards of our licenses whether it be a storefront, cultivation center or anywhere in between."