Cannabis businesses may finally gain access to basic banking and financial services under legislation progressing through the U.S. House of Representatives.
In a 45-15 vote on March 28, the House Financial Services Committee approved HR 1595, the bipartisan Secure and Fair Enforcement (SAFE) Banking Act, which would prevent federal regulators from punishing financial institutions for providing services to cannabis businesses operating in compliance with state laws. It is the first time legislation related to cannabis banking has been approved by a congressional committee.
“The House Financial Services Committee’s recent 45 to 15 vote supporting legislation that would provide marijuana businesses access to banking services is a watershed moment for the industry,” Steve Gormley, CEO and director of International Cannabrands, told Cannabis Business Times. “It is a relief to see Congress supporting common sense marijuana reforms that are in line with the will of the people.”
Rep. Ed Perlmutter (D-CO) and a bipartisan group of 108 original cosponsors introduced the bill earlier this year, and it has continued picking up support, with now 152 cosponsors in the House.
“The SAFE Banking Act being introduced into Congress is a step in the right direction, and the industry is very excited for it to pass,” said Sabas Carillo, CEO of Adnant Consulting. “An industry that has existed legally for years in small pockets of the country will gain a legitimacy as the up-and-coming professional industry that it’s proven itself to be. Denying access to banking and financial services holds the industry back, and it’s about time we allow it to come into its own and show the greater U.S. that it’s as legitimate as any other mainstream industry. More than anything else, banking is about being able to cover payroll and being able to provide benefits to your employees.”
Historically, cannabis companies have not had the same access to standard business practices like credit card processing and POS systems as non-cannabis businesses, due to federal prohibition. Last month, Evalon, a subsidiary of U.S. Bank, terminated its relationship with its CBD clients, the most recent headline-grabbing example of the industry’s unstable relationship with financial institutions. Last year, a merger led to a small Florida banking institution pulling out of all medical cannabis accounts.
“Given the lack of access to banking services, cannabis has been largely a cash business,” said Mark Krytiuk, president of Nabis Holdings. “With that, these businesses face tremendous risk when it comes to the security and safety of handling and storing cash. Not to mention the logistical and operational hurdles of paying employees, other businesses and even their taxes.”
With the advancement of the SAFE Banking Act, companies in the space are hopeful that they will soon be able to operate like any other business.
“Standard business practices will become easier for us, like soliciting services, renting property and paying taxes,” said Salwa Ibrahim, founder of MKSI Investments. “It’s a crucial service for organizations to gain legitimacy and security in this burgeoning new industry.”
For Tom Zuber, managing partner of Zuber Lawler, a law firm that has served cannabis clients for over 12 years, federal guidance on banking is also necessary to help U.S. cannabis businesses compete in the emerging global marketplace.
“I’m encouraged by the vote of the House Financial Services Committee to advance legislation that would increase the access of cannabis businesses to banking services,” he told Cannabis Business Times. “The legalization of cannabis continues its march around the world. Aside from ending prohibition itself, there are few things that our federal government can do to better help U.S. companies compete well in the emerging global legalized cannabis market than to allow them access to the same banking services from which their competitors in Canada and other countries already benefit.”
The federal government’s greenlight on banking would also ease the tension between state-legal cannabis businesses and financial institutions beholden to federal regulators.
“For too long, cannabis-related businesses that have been legalized by their states have been caught in a grey area where, due to tension between permissive state laws and federal cannabis prohibitions, they are shut out of the financial system altogether,” said Ben Curren, CEO of cannabis POS software company Green Bits, in a public statement. “Now, Congress has taken a major step forward to make this rapidly-growing industry more safe, secure, and transparent.”
“This is a positive step forward to address an untenable tension between state-legal cannabis marketplaces and federal marijuana prohibition,” said NORML Political Director Justin Strekal in a public statement. “No industry can operate safely, transparently or effectively without access to banks or other financial institutions. In order to best support the states that have had the good judgment to license and regulate businesses to produce, manufacture or distribute cannabis, it is critical that Congress address the lack of basic banking services and amend federal law accordingly, and the SAFE Banking Act is one pathway to address this situation.”
The SAFE Banking Act now goes to the House for further consideration before a possible full floor vote. While some are optimistic about its fate, others say the legislation’s passage is unlikely.
“Although exciting to see movement on the SAFE Act getting out of committee, we are not holding our breath for this to pass,” said Jordan Friedman, CEO of Zodaka, a payment processing company. “It’s great to see our congressmen and women trying to put something together to solve the giant problem of banking in cannabis, but we think it is extremely unlikely that this makes it all the way through congress. This just isn’t that meaningful until it passes all the way through the legislative process.”
National Cannabis Industry Association Executive Director Aaron Smith, on the other hand, believes lawmakers will approve the legislation, should a full House vote take place. “The cannabis and financial services industries have been waiting for clarification and protection for far too long, and we are confident the House would approve this bill if allowed to vote on it without further delay,” he said in a public statement.
Perlmutter first introduced similar legislation in 2013 and has continued offering banking bills every year since, although the legislation has stalled in every session.
Passage of the SAFE Banking Act is just one step in a long road of federal cannabis policy reform, according to Strekal. “Ultimately, the banking issue is just one symptom of the toxic and cruel policy of federal marijuana criminalization,” he said in his statement. “In order to truly bring the vibrant marijuana economy out of the shadows, actions need to be taken by Congress to end federal prohibition and the discrimination the comes with this failed policy.”
With the STATES Act reintroduced in Congress last week to protect states’ rights to enact their own cannabis laws, free from federal interference, some industry stakeholders are optimistic that this sort of broader reform is on the horizon.
“We’ve already seen that the STATES Act was introduced in both the House and Senate on Thursday, which would block the federal government from punishing people for actions that are in compliance with state laws,” said Nabis Holdings CEO and Director Shay Shnet. “This applies to anything related to the manufacture, production, possession, distribution, dispensation, administration or delivery of cannabis. I also foresee the establishment of comprehensive medical cannabis reforms later this year, allowing for medical research in the development of therapies and other consumer products derived from cannabis and its components."