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The Safe Banking Act Passes The House
In September, the House passed H.R. 1595, the “Secure and Fair Enforcement (SAFE) Banking Act,” sponsored by Representatives Ed Perlmutter (D-CO) and Steve Stivers (R-OH), by a bipartisan vote of 321 - 103. This legislation creates a safe harbor for federally insured financial institutions to provide banking services to cannabis-related businesses (or businesses that work with them) in states that have legalized the substance. A companion bill, S. 1200, was introduced in the Senate earlier this year by Senators Cory Gardner (R-CO) and Jeff Merkley (D-OR).
Currently, 33 states and the District of Columbia have legalized cannabis for medicinal and/or recreational purposes, and it is estimated that the industry has already brought in more than $10 billion in sales and $1 billion in state tax revenue. However, cannabis is still illegal at the federal level, classified as a schedule-1 narcotic under the Controlled Substances Act. This disparity between state and federal law has resulted in a complicated regime for businesses operating legally within states and how they conduct their finances. FDIC-insured banks cannot accept money from cannabis-businesses, or they risk running afoul of anti-money laundering laws. This includes not just cannabis growers and retailers, but also trucking companies used for transport, rent paid for storage or retail space, and many other businesses that may touch on the industry.
The result of the prohibition against banking is that where a cannabis business does not have access to other financial institutions (e.g. local banks that are not insured by the FDIC), they must operate on a cash-only basis. This creates a safety risk for both those businesses and the communities they operate in, often necessitating expensive security measures to protect the cash. In addition, it presents a challenge for those businesses to comply with the state tax laws, with some business owners having to travel several hours to get to their nearest tax office and pay their taxes – again, in cash. Finally, it makes tracking and regulating the industry that much more difficult, without the standard forms and information collection that banking provides for regulators.
By creating a safe-harbor for financial institutions in states that have legalized cannabis to work with those businesses, the SAFE Banking Act resolves many of those issues, and also provides a venue for those businesses tangentially connected to cannabis (especially the real estate sector) to grow.
In May, at the 2019 REALTORS® Legislative Meetings and Trade Expo, NAR’s Board of Directors approved policy originating in the Commercial Federal Policy Committee supporting the rights of states and their residents to create laws aligned with their own interests, and supporting businesses that are properly registered and are legitimate by state standards to have the ability to access banking services. NAR sent a letter of support for the SAFE Banking Act to the full House of Representatives ahead of its floor vote, and will continue to advocate for a markup of S. 1200 by the Senate Banking Committee and ultimately its passage in the Senate as well.
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