May SAFE Banking Act Finally Cross the Finish Line?

On February 3, 2022, the U.S. House of Representatives voted 262-168 to adopt the Secure and Fair Enforcement (SAFE) Banking Act...

On February 3, 2022, the U.S. House of Representatives voted 262-168 to adopt the Secure and Fair Enforcement (SAFE) Banking Act. This time around, the cannabis banking legislation was included as an amendment to the America COMPETES (Creating Opportunities to Meaningfully Promote Excellence in Technology) Act of 2022, which targets competition with China. The COMPETES Act now heads to the reconciliation process, and it is unclear if the SAFE Act amendment will remain in the final bill.

How the SAFE Banking Act Would Help Cannabis Businesses

The SAFE Banking Act seeks to harmonize federal and state law by prohibiting federal regulators from taking punitive measures against depository institutions that provide banking services to legitimate cannabis-related businesses and ancillary businesses.

“Cannabis-related businesses — big and small — and their employees are in desperate need of access to the banking system and access to capital in order to operate in an efficient, safe manner and compete in the growing global cannabis marketplace,” sponsor Rep. Ed Perlmutter said in a statement. 

Because marijuana remains illegal under the Controlled Substances Act (CSA), many financial institutions decline to provide services to the cannabis industry, forcing businesses to deal exclusively in cash. The unavailability of banking services not only makes cannabis-related businesses targets of crime, but also makes it more challenging for regulators to oversee their operations. 

The SAFE Banking Act seeks to provide legal cannabis businesses with greater access to financial services. The legislation would specifically prevent federal banking regulators from:

• Prohibiting, penalizing or discouraging a bank from providing financial services to a legitimate state-sanctioned and regulated cannabis business, or an associated business (such as a vendor or landlord providing services to a legal cannabis business);
• Prohibiting, penalizing or discouraging an insurer from providing insurance products to a legitimate, state-sanctioned and regulated cannabis business, or an associated business (such as a vendor or landlord providing services to a legal cannabis business);
• Terminating or limiting a bank’s federal deposit insurance solely because the bank is providing services to a state-sanctioned cannabis business or associated business;
• Recommending or incentivizing a bank to halt or downgrade providing any kind of banking services to these businesses; or
• Taking any action on a loan to an owner or operator of a cannabis-related business.

Additionally, the SAFE Banking Act creates a safe harbor from criminal prosecution and liability and asset forfeiture for banks and their officers and employees who provide financial services to legitimate, state-sanctioned cannabis businesses, while maintaining banks’ right to choose not to offer those services. The SAFE Banking Act also provides protections for hemp and hemp-derived CBD-related businesses.

Likelihood of Passage in the Senate

Despite having bipartisan and industry support, the SAFE Act’s likelihood of passage is still uncertain in the Senate. To date, the House has passed the cannabis banking legislation six times. Last year, it passed as a stand-alone bill and as an amendment to the fiscal 2022 defense authorization bill. Both times it failed to generate enough support in the Senate.

The SAFE Banking Act still faces challenges in the Senate from both sides of the aisle. Senate Minority Leader Mitch McConnell (R-KY) has criticized Democrats for including it in the China competition bill, characterizing it as a “poison pill.” Additionally, Democrats, such as Senate Majority Leader Chuck Schumer and Sen. Cory Booker (D-N.J.), continue to insist that lawmakers pass comprehensive cannabis reform rather than take a piecemeal approach.

Ultimately, the SAFE Banking Act’s ability to finally cross the finish line will likely come down to the conference process, specifically whether the two chambers come together to resolve the differences between the two bills. As the clock starts to run down on the Democratic majorities in the House and Senate, it is unclear if enough Democrats will be now willing to get behind passing more targeted, bipartisan cannabis reform.

How We Can Help Cannabis Businesses

Our attorneys regularly counsel businesses seeking to operate in the medical cannabis industry, as well as the emerging New York and New Jersey recreational cannabis markets. With offices in Washington, D.C., we can also work with legislators to enact cannabis legislation that provides greater regulatory certainty for the industry. With regard to the SAFE Banking Act and pending legalization bills, our advocacy may involve working with Senate offices to tailor legislation that incorporates client perspectives.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact Dan McKillop, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.

This article is a part of a series pertaining to cannabis legalization in New Jersey and the United States at large. Prior articles in this series are below:

• Year in Review: Top Cannabis Legal Developments for 2021
• Can Latest Cannabis Legalization Bill Bridge the Partisan Divide?
• New Jersey Adult-Use Cannabis License Applications Coming in December

Disclaimer: Possession, use, distribution, and/or sale of cannabis is a Federal crime and is subject to related Federal policy. Legal advice provided by Scarinci Hollenbeck, LLC is designed to counsel clients regarding the validity, scope, meaning, and application of existing and/or proposed cannabis law. Scarinci Hollenbeck, LLC will not provide assistance in circumventing Federal or state cannabis law or policy, and advice provided by our office should not be construed as such.