In an unprecedented move, the U.S. Senate enacted a $2-trillion stimulus package in response to the Coronavirus crisis. But will cannabis companies get to see any of this?
Last week, over 3 million Americans filed for unemployment benefits, as the coronavirus crisis forced many businesses to cut costs or close down entirely. The COVID-19 crisis has led to entire states, like New York, California, and Alaska entering lockdown, with State governments urging citizens to stay at home unless they need groceries.
The lockdown is designed to keep citizens apart from one another to minimize the spread of the novel coronavirus, which so far has infected over 700,000 people and led to the deaths of over 33,000. In the United States, over 130,000 people have reported testing positive for the virus, and 2,300 people have passed away as a result. The belief is that if people continue to congregate in large groups, the spread of coronavirus will exponentially grow to the point of overwhelming the healthcare system – whereas if citizens remain isolated, the spread can be slowed down and health professionals can learn to better cope with the issue.
Such lockdown measures have been undertaken across the globe, and businesses have taken a severe hit as a result. In the United States, millions are applying for unemployment benefits each week, and stock markets have been sent into a precipitous freefall.
In order to mitigate the fallout from COVID-19, the U.S. Senate along with the 45th President, Donald Trump, have signed into action the largest stimulus package in the country's history, one which would inject over $2-trillion into the economy.
Though, a question many are wondering is, will cannabis companies receive any of this coronavirus stimulus package?
Will the CARES Act provide support to cannabis businesses?
The multi-trillion-dollar stimulus package is called the "Coronavirus Aid, Relief, and Economic Security Act" (also referred to as the CARES Act), and was overwhelmingly passed by the Senate 96-0.
Part of the CARES Act includes $349 billion which will be dedicated to small businesses in the form of loans and debt relief in attempts to mitigate unemployment and help keep businesses running. The Act would provide small businesses loans that can help them cover payroll expenses and salaries, as well as rent, mortgage, and utility costs, under what is known as the "Paycheck Protection Program."
The package comes at a time when many businesses are forced to cut expenses due to their decreased sales, though there is one stipulation that could negatively affect businesses in the cannabis space: "The CARES Act delegates authority to depository institutions, insured credit unions, institutions of the Farm Credit System and other lenders to provide loans under this program."
This is concerning for cannabis businesses as cannabis remains federally illegal as a schedule 1 drug, and as such, financial institutions have been historically reticent to get involved with the weed industry since state-based legalization occurred.
In fact, financial institutions could theoretically be charged with aiding and abetting a federal crime if they come into contact with a cannabis company, regardless of if the plant is legal in that state.
This has left the cannabis industry virtually unable to deal with banks, with many stores requiring that shoppers pay in cash.
Companies have had to store their money in vaults, often with armed security guards and vans for when it needs to be transported. When it's tax time, some business owners will hire employees to count their cash, while others have invested in expensive, automated weighing machines to help them count.
The lack of access to financial institutions was already such a major issue for cannabis companies that some had compared it to "redlining" and legislators sought to overcome the issue by introducing the SAFE Act.
The SAFE Marijuana Banking Act
The Secure and Fair Enforcement Act, also known as the SAFE Banking Act (H.R. 1595) is proposed legislation that seeks to address the issues of financing a marijuana company. The Act was designed to provide protection for financial institutions that chose to provide loans to cannabis businesses in states where the plant is legal. The Act would've opened the floodgates for cannabis companies to gain access to loans, as well as handling their cash through banks rather than in paper form.
The Act made history in 2019 when it became the first marijuana bill to be passed by a House floor vote, though since then, very little has occurred. In fact, some have gone as far as to say the act is doomed, and likely won't be passed in 2020.
The primary reason for the pessimism toward the SAFE Act was due to Senator Mike Crapo, who is the Banking Committee Chairman of Idaho. Last December, Crapo heavily criticized the SAFE Banking Act, instead suggesting that financial institutions should only support hemp and CBD-based businesses.
Now, with the coronavirus and its impacts in full-force, it's looking like a snowflakes chance in hell that the SAFE Banking Act will be passed this year, leaving cannabis companies unable to gain any kind of financial restitution during the COVID-19 crisis.
This news that cannabis companies aren't included in the coronavirus stimulus is a heavy blow, and places additional pressure on an emergent industry that was already battling a capital crunch, with many companies not yet profitable while expending enormous amounts of cash.
Whether or not legislators may rethink their position on the eligibility of cannabis companies to receive some coronavirus stimulus is uncertain, though U.S. citizens haven't seen the last of the stimulus packages. And while Americans are keeping a close eye on their bank accounts with the third wave of coronavirus stimulus set to arrive in the coming weeks, lawmakers are already planning the fourth phase of stimulus, on which the Senate Republican Policy Committee Chairman Roy Blunt has said: "The minute we're done with phase three, we'll start talking about phase four because all of us know that phase three can't have included everything that needs to be included."
Whether cannabis is one of the industries that "need to be included" in the next wave of stimulus remains yet to be seen, though the industry has certainly given the U.S. much to be thankful for.
The cannabis industry was the fastest-growing job creator in the U.S. for several years in a row, as well as generating billions in tax revenue, with Colorado alone bringing in over $1bn in tax revenue since 2014. And, most recently, cannabis dispensaries have been labeled "essential" due to the medical necessity that cannabis products have for patients in need.
Will the government attempt to keep these "essential" services afloat? Or will the cannabis industry be left to fend for itself? Only time will tell.
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