WASHINGTON — A bipartisan group of House members reintroduced legislation Thursday that would provide greater legal cover to financial institutions serving state-licensed cannabis businesses.
The Secure and Fair Enforcement Banking Act, or SAFE Banking Act, would bar federal regulators from penalizing banks and credit unions for working with marijuana businesses that are compliant with state laws. It passed the House in 2019 but stands a greater chance of becoming law now that Democrats have a slim hold on power in the Senate.
“Thousands of employees and businesses across this country have been forced to deal in piles of cash for far too long, and it is the responsibility of Congress to step up and take action to align federal and state laws for the safety of our constituents and communities,”
Rep. Ed Perlmutter, D-Colo., who authored the bill, said in a statement.
The bill has more than 100 co-sponsors, including lead sponsors Nydia Velazquez, D-N.Y., Steve Stivers, R-Ohio, and Warren Davidson, R-Ohio.
Its supporters argue that the legislation would not only provide greater legal certainty to banks and credit unions, but could also improve public safety for companies that have been forced to deal in cash, given their lack of access to banking services.
The bill originally
But the situation is different after the 2020 elections. Current Senate Banking Committee Chairman Sherrod Brown, D-Ohio,
Even the Republican ranking member of the committee, Sen. Pat Toomey of Pennsylvania, has indicated his support for the SAFE Banking Act,
The banking industry supports the SAFE Banking Act, arguing that as more states legalize marijuana, more legal businesses could be shut out of the financial system in the absence of legislation.
“Although some financial institutions have weighed the prevailing climate of non-enforcement and have decided to shoulder the risk in order to serve the needs of their communities, the majority of financial institutions will not take the legal, regulatory or reputational risk associated with banking cannabis-related businesses without congressional action,” American Bankers Association President and CEO Rob Nichols wrote in a March 17 letter to the sponsors of the bill.
The SAFE Banking Act is likely to pass both chambers of Congress this year, said Ed Mills, a policy analyst with Raymond James, though it could be held up if Democrats look to enact broader cannabis reform legislation, such as federal legalization.
"The shift from Republican to Democratic control in the Senate is a clear positive for the act, but the desire among some Democrats could be to go bigger on cannabis reform as opposed to enacting a narrow fix for the financial industry, further delaying the act’s advancement,” Mills wrote in a February note.
Senate Majority Leader Chuck Schumer, D-N.Y., along with Sens. Cory Booker, D-N.J., and Ron Wyden, D-Ore., issued a joint statement in February promising comprehensive cannabis reform and said they would release “a unified discussion draft” on the topic early this year.
“We are committed to working together to put forward and advance comprehensive cannabis reform legislation that will not only turn the page on this sad chapter in American history,” the senators said in a statement, referring to the War on Drugs, “but also undo the devastating consequences of these discriminatory policies. The Senate will make consideration of these reforms a priority.”
The SAFE Banking Act could be a “backup plan” for Democrats if they are unable to achieve federal marijuana legalization, Jaret Seiberg, an analyst with Cowen Washington Research Group, said in a note.
“Right now there is pressure to pass a cannabis bill. Passing the SAFE Act would relieve that pressure, which means legalization would be unlikely to get a Senate vote,” he said. “It is why the more likely play is to try to pass legalization with the backup plan of switching to the SAFE Act if there are not the votes to legalize.”
