The SAFE Banking Act: Fixing the Marijuana Banking Problems in America

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It has yet to be put to a vote among Congress, yet the SAFE Banking Act offers the cannabis industry an opportunity it has been desperately waiting for: doing full business with banking and financial institutions. Here is what you should know about the SAFE Banking Act.

The Secure and Fair Enforcement Banking Act

It was April 2017 when Representative Ed Perlmutter of the 7th Colorado Congressional  District submitted a bill. The bill was designed to create legal protections and guarantees for financial businesses and banking institutions who wish to do business in the cannabis industry.

The Act aims to finally answer the uncertainty faced by the highly regulated banking industry when dealing with the highly regulated

AND federally illegal marijuana industry.

With the Secure and Fair Enforcement Banking Act (the SAFE Banking Act), Rep. Ed Perlmutter took aim at one of the most enduring issues facing cannabis businesses in the US – allowing marijuana banking issues to be finally fixed.

Following Perlmutter's SAFE Banking Act being placed under review in the House of Representatives, a bill of the same name was introduced in the US Senate during May of 2017. The bill was sponsored by Senator Jeff Merkley of Oregon.

Both Bills Offer Bipartisan Support

marijuana-piggy-bank-By John T Takai
Photo by: John T Takai/ shutterstock
The SAFE Banking Act has been cosponsored by Congressional members on both sides of the US political spectrum. It is worth noting, however, that support from Republican representatives accounted for nearly 14%, whereas Democratic support came in at 86%.

This trend can be recognized in the Senate chambers as well. The version of the SAFE Banking Act introduced by Sen. Merkley has a total of 15-cosponsors. Over 25% of support is from Republican senators, whereas 2/3rds of cosponsors were Democratic. There is a single Independent – Sen. Bernie Sanders of Vermont.

Though each version of the SAFE Banking Act offers bipartisan support, the movement of the bill has been scarce. With each passing month, the path to becoming law becomes more protracted.

For instance, the Senate version was sent to the Committee on Banking, Housing, and Urban Affairs in June 2017. Despite several hearings on the bill, no action has been reported since. Conversely, the House version of the SAFE Banking Act was referred to the Subcommittee on Crime, Terrorism, Homeland Security, and Investigations in September 2017 to further determine how marijuana banking could be done safely.

No further action or progress has occurred since.

A Path to Normalization

Politics are a battlefield, society is a business, and, under the action of both, a bill is a magic wand. Able to change broadly how interactions within the world, business, and society can occur, a bill can offer an answer to a need – but that’s not all.

The SAFE Banking Act of 2017 may face an upstream battle, yet it is far from being lost. The current energy and support among wide segments of the US for marijuana legalization are sure to encourage campaigning politicians to support the cause of marijuana reform.

If congressional action were to legalize marijuana at the federal level, the SAFE Banking Act would not need to exist. Financial institutions could act and engage in marijuana banking in the same way they do any other business.

If Congress were to instead remove cannabis from its Schedule I classification under the Controlled Substances Act (where heroin currently is classified) and move it to Schedule II or III, The SAFE Banking Act would likely become obsolete and only licensed medical providers would be able to offer cannabis products. In either case, however, the federal government cannot continue to keep marijuana illegal.

While the SAFE Banking Act does not make cannabis legal at the federal level, it allows the industry to continue through the same financial channels of any other business. This would grant both the banking and cannabis industries opportunities for growth that are currently stifled by the cash economy that most marijuana businesses operate under.

Keeping The SAFE Banking Act Alive

In January 2018, a letter was sent to top representatives in Congress, including Speaker Paul Ryan and Majority Leader Mitch McConnell, as well as Speaker Nancy Pelosi and Minority Leader Chuck Schumer, among others.

The letter was a push by the Attorney Generals from 19 of the 29 states that currently have laws allowing the use of marijuana for medical and/or recreational purposes.

The letter argued that the classification by the federal government of marijuana as an illegal substance significantly limits the willingness of banks to provide financial services to state-licensed cannabis businesses.

In addition, strict financial and banking statutes require disclosures from clients which would put banking institutions at risk of criminal and civil liability under the Controlled Substances Act.

The fix?

Pass into law a measure like the SAFE Banking Act.

How It Would Work

Under the SAFE Banking Act, financial institutions would be able to service marijuana-related businesses free of fear of the federal government, dramatically changing the course of marijuana banking. The legislation seeks to ensure that small businesses and their employees are treated fairly under the law.

Due to the way the current financial code is written, hundreds of licensed and regulated marijuana businesses can’t access the banking industry. This causes problems and shortcomings for governments, businesses, and the consumers who use their services, including:

  • Accepting credit cards
  • Depositing revenues from sales
  • Writing checks to vendors
  • Paying income or taxes

By moving the sales and tracking thereof of cannabis-related businesses, the SAFE Banking Act would reduce the likelihood of crime or robberies (less cash on hand). Additionally, if implemented correctly and efficiently, the process may help boost law-enforcement efforts and encourage higher tax revenues through simplification of the reporting process.