The SAFE Marijuana Banking Act Explained

The Secure And Fair Enforcement (SAFE) Banking Act is scheduled to appear for a vote in the house within the next week, leaving many cannabis business owners with their fingers crossed.

In recent years, cannabis has made tremendous strides on a global scale, creating hundreds of thousands of jobs and generating billions in taxes for states and governments that have taken a chance on the plant.

Though as we mentioned recently in our interview with the ancillary venture capital fund CanopyBoulder, there are some key difficulties that cannabis business owners continue to face in the U.S.

Namely, the inaccessibility of funding from banks.

While cannabis is increasingly being legalized on a state level, the plant remains federally illegal and falls into the category of a Schedule One substance alongside other narcotics such as heroin, LSD, and MDMA.

Cannabis' strict scheduling has placed a massive red flag around the industry for banks and financiers, who could be charged with aiding and abetting a federal crime if they come into contact with the plant.

This has left the cannabis industry virtually unable to deal with banks, with many stores requiring that shoppers pay in cash.

Companies then have 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.

And not only is this cash-only method circuitous and difficult, but it's also dangerous for many store owners.

Alyson Martin, Co-founder of Cannabis Wire recently stated her own fears around potential robberies due to the high volume of cash held by cannabis businesses.

"Because these are essentially cash-only businesses, they become sitting ducks for robberies, thefts and those sorts of things. I don't think I've talked to anybody who hasn't had banking headaches." Alyson Martin, Co-founder of Cannabis Wire

Though this could all be about to change, thanks to the SAFE Banking Act, which is due to appear in the House sometime shortly.

The SAFE Banking Act

The SAFE Banking Act (H.R. 1595) is proposed legislation which seeks to address the issues of financing a marijuana company.

The Act would essentially provide protection for financial institutions who choose to provide loans to cannabis businesses in states where the plant is legal.

This would open the floodgates for cannabis companies to gain access to loans, as well as handling their cash through banks rather than in paper form.

As it stands currently, start-up cannabis businesses may easily fail due to their inability to access loans, which many are calling a new form of redlining.

The Act will not only make business safer and easier for larger, more established companies who deal with a lot of cash but would also effectively remove barriers to entry for those considering to start their own company.

The bill is expected to be put to vote next week and is being filed under a suspension of the rules, which means that two-thirds of the house will need to be in favor of the vote in order for it to pass.

Though cannabis experts are confident it will, as the bill was already progressed by the House Financial Services Committee in a 45-15 vote earlier this year.

On top of this, Democrats, as led by Nancy Pelosi, have control of the house with 231 seats, compared with 199 for Republicans.

Historically, those on the blue side of the aisle have been more open to the idea of drug legalization, which suggests the Bill has an easy path forward.

Though the Bill is not without its opponents, many of whom do in fact align with the Democrats. Civil Rights Advocates have argued that the SAFE Act doesn't address marijuana reform "holistically," as they wrote in a letter to House Speaker Nancy Pelosi last week.

"The banking bill does not address marijuana reform holistically. Instead, it narrowly addresses the issues of banking and improved access to financial services, measures that would benefit the marijuana industry, not communities who have felt the brunt of prohibition."

These are sentiments shared by Democratic Senator and Presidential candidate Cory Booker, who stated on Twitter that "any marijuana legislation moving through Congress must include restorative justice for those most harmed by the War on Drugs in order to get my vote."

Whether these viewpoints will sway the house will be revealed when the Bill is presented next week.

Additionally, provisions have been added to the bill to encompass hemp-based businesses and those who handle hemp-derived CBD, in order to ensure they're included in the banking reform.

Although hemp is federally legal, many CBD businesses report that banks are hesitant to work with them. The Bill would help to confirm that hemp-derived products are also federally protected from intervention.

While time will tell how the voting plays on out next week, one thing is for certain; if the SAFE Act is passed, the doors to the cannabis industry will be opened like never before. Those with great ideas but a lack of capital may now be able to enter the arena, and larger, more established companies can save costs on security and hiring people to count their cash.

We may soon witness the cannabis industry overcome yet another legislative hurdle.

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Louis O'Neill
Louis O'Neill

Louis is a writer based in Sydney with a focus on social and political issues. Having interviewed local politicians and entrepreneurs, Louis now focuses on cannabis culture, legislation & reform.

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