The U.S. House of Representatives has passed the Secure and Fair Enforcement (SAFE) Banking Act five times only to have the legislation stalled in the Senate. The legislation’s 2021 iteration was just the latest to die in Congress’s senior chamber. Proponents attempted to get it through by attaching it to the National Defense Authorization Act but were forced to decouple the two in order to get the latter bill passed.
So what’s all the fuss? The SAFE Banking Act has both Democrat and Republican sponsors in the Senate. The administration has hinted at a willingness to sign the legislation should it pass. Yet SAFE is not all it’s cracked up to be. There is more to it than meets the eye.
It Is Not So Simple
Proponents of legalized marijuana and the SAFE Banking Act tend to portray the legislation as a very simple bill. As the thinking goes, all the bill does is eliminate the prosecutorial risk financial institutions take by extending services to marijuana related businesses (MRBs). Easy peasy, right? Not so fast.
The bill may make it easier for financial institutions to do business with MRBs, but it does not give such businesses genuine legitimacy. The bill is an institution-facing bill rather than a business-facing bill. SAFE also doesn’t take any steps toward decriminalizing marijuana. So when all is said and done, a variety of federal agencies with jurisdiction could still go after banks, credit unions, and even private lenders for money-laundering and other illegal activities.
Piggybacking on Other Legislation
The fact that the SAFE Banking Act is not exactly what it seems is evidenced by senators having to piggyback it with another piece of legislation. Piggybacking is a common tactic used by legislators looking to force through controversial legislation for which they cannot gain overwhelming support. Piggybacking one bill on top of another forces lawmakers to compromise.
If the SAFE Banking Act were a strong enough piece of legislation, it could stand on its own merits. Yet it cannot. Rather than criticizing senators who would vote no on the bill, maybe its proponent should step back and wonder why the vote is so tight. Fixing what is wrong with the legislation may solve the problem. Otherwise, attaching it to other bills with a greater chance of passage ignores the fact that the SAFE Banking Act has significant deficiencies.
Banking for MRBs
In the meantime, MRBs continue to cobble together financial services. Both recreational and medical use cannabis remain largely cash businesses. However, we are starting to see smaller regional and local banks offering MRBs basic services like checking accounts and debit cards. It’s a start.
Unfortunately, the fees for basic banking services are prohibitively high. Banks and credit unions charge the higher fees in order to offset some of financial risk they are taking. Still, there is more to business banking than checking accounts and debit cards. What about the company looking for a small business loan in order to expand?
Beehive Farmacy is a licensed Utah medical cannabis dispensary with locations in Brigham City and Salt Lake City. But what if they wanted to expand to Provo and needed a $75,000 business loan to do so? Right now, private equity is the best option. The company is never going to get a loan from a bank.
The SAFE Banking Act promises to cure the ills of obtaining financial services in the marijuana sector. However, there is more to the bill than meets the eye. There are legitimate reasons it has failed to pass the Senate five times.
