United States Currency

SAFE Banking Act

A Win for Cannabis Banking

The relationship between state and federal government in the U.S. has been strained from the beginning. The most obvious example from the last decade is the Cannabis industry. While the 2018 Farm Bill, spearheaded by Kentucky Senator Mitch McConnel, brought hemp (Cannabis products containing less than 0.3% THC by dry weight) into the Federal government’s good graces, marijuana (Cannabis products containing more than 0.3% TCB by dry weight) remains on the grey market where it’s only legal in certain states.

While this federal/state government distinction is not very exciting, it has massive implications, even for businesses confined to a single state. Everything from federal tax deductions to having a checking account is harder (if not impossible) in the Cannabis sector. That lack of access to programs that benefit other business types in the U.S. makes staying in the black harder for Cannabis businesses. It’s surprising especially since Cannabis businesses contribute massively to tax revenue in places like Oregon and Washington.

On Wed., Sept. 25, those barriers to business weakened when the Secure and Fair Enforcement (SAFE) Banking Act, sponsored by Democrat Senator Jeff Merkley of Oregon, was voted through the House in a landslide. The SAFE Banking Act permanently protects financial institutions wanting to serve businesses in the Cannabis industry in states where those businesses are legalized. Specifically, the Act prohibits banking regulators from blocking financial institutions from doing business with Cannabis companies or punishing those who already offer services.

The vote on Sept. 25 was surprising for many reasons. For starters, it is the first piece of stand-alone Cannabis legislation to come up for a vote in Congress. Second, if the Act succeeds, Congress will no longer need to pass annual riders protecting banks and credit unions from being targeted by the federal government for operating in the Cannabis sphere.

The third is the sheer number of votes supporting the SAFE Banking Act. On Sept. 25, a “suspension of the rules” was used to quickly bring the act to a vote on. This is usually reserved for noncontroversial legislation where lawmakers want it to quickly pass. Such rule suspensions require a two-thirds majority for passage. The SAFE Banking Act needed 290 out of 435 votes to pass but managed to get 321 yay votes showing that cannabis banking reform is an increasingly bipartisan issue.

While this vote is historic, there is still a significant chance the bill could fail like its predecessor. In 2017, the SAFE Banking Act died in the House without ever coming to a vote. Without continued bipartisan support, the same thing will happen to the new version of the bill when it heads to the Republican-controlled Senate, the next step on its path to becoming a law. There is hope, however, as the Senate companion bill had a hearing on July 25, 2019, in the Senate Banking Committee. Unfortunately, the Republican Chair of the committee, Senator Crapo (R-Id) was the only Republican in attendance.

In Washington state, like in other states, many Cannabis retailers deal in cash only. Consumers are inconvenienced by needing to carry relatively small amounts of cash, and retailers and their staff are potentially put in danger when forced to carry large volumes of cash to accomplish regular tasks like paying rent or taxes.

Many Washington Cannabis businesses found a home with local credit unions like Salal Credit Union, which operates branches all over Washington, or MAPs Credit Union, which has a strong presence across Oregon. Even so, such options do not offer all of the conveniences of modern banking services. Retailers are still required to physically move their funds from stores to credit union locations via large envelopes of money, reminiscent of the industry’s less than legal past.

Like the banking industry, law firms and solo practitioners are hesitant to enter the Cannabis industry with some major firms holding off even with the federal legalization of hemp. Fortunately, firms like Gleam Law have been in the industry since the beginning. The Gleam Law team features specialists like Alan Hanson, who works in the niche legal field of Cannabis banking to help Cannabis businesses navigate their options. Alan is recognized as the cannabis lawyer and cannabis credit union expert in Oregon. His practice focuses on developing cannabis and hemp credit union divisions. Alan spent 17 years as the General Counsel and Compliance Officer for Maps Credit Union where he created and managed Oregon’s first fully compliant Cannabis credit union. This program remains the largest, most successful cannabis credit union division in Oregon. Alan is an invaluable part of the team at Gleam Law and can be contacted at alan@gleamlaw.com.