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Cannabis leaf on $100 bill
When the House of Representatives passed the National Defense Authorization Act (NDAA) on Thursday, Sept. 23, the military appropriations bill included language that would protect financial institutions from federal interference when working with state-legal cannabis.
As it currently stands, cannabis is a Schedule I banned substance on the federal level. While most states have been legalizing marijuana to some degree, and while the federal government has, so far, chosen not to interfere with state-legal marijuana, possession or sale of cannabis remains a crime as far as federal authorities are concerned. Therefore, banks, credit unions and other financial institutions find themselves in the uncomfortable position of servicing a billion-dollar industry which is considered criminal by the federal government. As a result, most banks refuse to work with state-legal marijuana businesses.
This leads to unique challenges for the marijuana industry; by being forced to be cash-only, these businesses become privileged targets for criminals, and many businesses struggle to pay their taxes, get insured and get a business loan, for instance. Legal, aboveboard cannabis companies have to overcome issues that should never have been a problem in the first place because banks refuse to cooperate with them.
According to most recent figures from the Financial Crimes Enforcement Network (FinCEN), only 706 financial institutions are willing to work with state-legal cannabis businesses, just a small part of the roughly 5,000 such institutions in the country. The number of banks willing to work with the industry reached a peak of 747 in 2019 and has been fluctuating since, seeing an uptick in the third quarter of 2021.
To remediate this, Democrats have repeatedly introduced the SAFE Banking Act, a bill that would act as a simple guardrail protecting banks and other financial institutions working with state-legal cannabis businesses, such as insurance companies. This bill has been passed by the House of Representatives multiple times throughout several congresses. The bill’s chief sponsor, Rep. Ed Perlmutter, has been introducing this piece of legislation “every Congress since 2013,” but it never cleared the Senate, which had been controlled by Republicans for nearly a decade.
Is It Possible to Pass the SAFE Act?
The SAFE Banking Act does not change the legality of cannabis itself and cannot be construed as a bill leading to marijuana legalization. As a purely pro-business, pro-corporate and pro-freedom bill, one might expect that it would receive the favors of Republican lawmakers. But when the SAFE Act passed the House most recently in April 2021, it did so with unanimous support among Democrats and half-hearted support from Republicans. Not a single “No” vote was recorded among Democrats, while 101 “No” votes came from Republican representatives. As such, passing the SAFE Act into law has become a game of outplaying Republican obstructionists.
The NDAA is a must-pass piece of legislation that has been enacted every year for more than half a century and outlines the spending of more than three-quarters of a trillion dollars in the fiscal year 2022. Amid pressing issues about the recent withdrawal from Afghanistan and U.S. military involvement in Syria and Yemen, the issue of cannabis reform in the U.S. was included as an amendment that would force Republicans to consider it, rather than refusing to vote on the SAFE Act at all—which had been its fate every time the House passed it. This has led to the dismay of numerous politicians who believe it is not germane to the topic of military funding.
When the U.S. Senate Committee on Armed Services released its version of the NDAA, it did not include any language relating to cannabis. This means that the House and Senate will have to reconcile the differences between their bills in order to force this must-pass legislation through. It is impossible to determine how many Republicans in the Senate would be willing to vote in favor of the amendment, so the conclusion of this legal fight remains up in the air.
To make the matter more difficult, there are some politicians who do agree with the SAFE Banking Act on its own but who disavow its inclusion in a military spending bill. Central figures like Senate Majority Leader Chuck Schumer have explicitly stated that marijuana reform and banking reform to include marijuana business should move hand in hand, as passing banking reform on its own might take away the steam that comprehensive cannabis reform might need. Sen. Cory Booker, a vocal supporter of cannabis legalization, has also spoken up against this measure. He was reported to have said of the inclusion of the SAFE Act in the NDAA, “It's something that should not be included … It undermines the ability to get comprehensive marijuana reform and the kind of things that are harder to get done like expungement of people's records.” Booker promised that he will lay himself down to block the SAFE Banking Act in order to increase pressure to consider banking reform as part of a broader marijuana legalization effort.
As such, and despite Democrats now having theoretical control over the Senate, the margin that they can afford is razor thin, and the opposition of just a few Democrats could spell the death of cannabis banking protections in the Senate … again.
