(This story was updated at 12:58 p.m. ET with more details and comments. Join an MJBizDaily LinkedIn Live about SAFER Banking at 2:30 p.m. ET Sept. 28.)
The latest push for federal cannabis banking reform in the United States passed a markup hearing in the Senate Banking Committee on Wednesday, demonstrating bipartisan support for allowing state-legal marijuana businesses to access financial services and setting up the bill for a full vote in the chamber.
The outcome of Wednesday’s Senate Banking Committee hearing improves the prospects that regular financial institutions can serve state-legal cannabis businesses despite federal marijuana prohibition, reducing the MJ industry’s inconvenient and dangerous dependence on doing business in cash.
The 23-member committee voted 14-9 in favor of sending the bill to the Senate floor with technical amendments.
It’s the first time the banking legislation – rebranded as the SAFER (Secure and Fair Enforcement Regulation) Banking Act – has garnered a yes vote in the Senate.
Charlie Bachtell, CEO of Chicago-headquartered multistate cannabis company Cresco Labs, said Wednesday’s vote represented “a big step in a multistep process.”
“We still have a lot of work in front of us,” Bachtell said in a media briefing after the vote.
“It sounds like some refinements are going to be needed before the bill gets to the floor for a full Senate vote.
“But I don’t want to undersell the importance of what happened today.”
However, the legislation is still far from becoming law. And its prospects in the House are unclear.
Next, the SAFER Banking Act faces a possible federal government shutdown on Oct. 1 amid a political battle between the Democrat-controlled Senate and the Republican-controlled House of Representatives.
That potential shutdown would pose risks for SAFER Banking as it winds its way through Congress, burning time that legislators could otherwise use to pass legislation.
Plaudits for bill’s progress
Regardless of the political unknowns, Wednesday’s committee vote was hailed by the regulated cannabis industry and related interests as a step in the right direction.
The vote comes “at a time where it could not be more urgently needed to help the regulated cannabis industry … be able to compete against the growing threat of an illicit market that greatly risks public safety and consumer safety,” Saphira Galoob, executive director of the Washington DC-based National Cannabis Roundtable, said in a statement.
The bill “should, in theory, eliminate the public safety risk related to the all-cash nature of the cannabis industry,” Ed Schmults, CEO of California-headquartered marijuana company StateHouse Holdings, said in a statement.
“We expect that, over time, the cost of capital for cannabis companies will begin to come down as well.”
The Washington DC-based International Brotherhood of Teamsters union, which represents workers in cannabis production and retail, also weighed in.
“As Congress works to establish the necessary guardrails around cannabis legalization, the labor and safety interests of workers must be paramount,” Teamsters General President Sean O’Brien said in a statement.
“Passing SAFER Banking is a necessary part of this process and can help improve working conditions while easing operational burdens for employers across the country.”
The American Bankers Association (ABA) – which includes members that serve marijuana companies – also lauded the bill’s progress.
“The status quo is simply untenable for consumers, small businesses and banks operating in states where cannabis is legal,” ABA President and CEO Rob Nichols said in a statement.
Some amendments shot down
The committee adopted an amendment to make technical changes to the bill, from committee Chair Sen. Sherrod Brown, an Ohio Democrat.
Other amendments were heard but not adopted.
The committee voted against an amendment from Sen. Raphael Warnock, a Georgia Democrat, that would have established a five-year sunset clause on SAFER Banking Act policies “unless we demonstrate that they have actually made life better for the millions of families and the communities being harmed right now by the war on drugs.”
An amendment from Sen. Mike Crapo, an Idaho Republican, that would have revamped language in Section 10 of the bill was also voted down.
Cresco CEO Bachtell said that section of the bill might require more work “to make sure that there is bipartisan support there.”
Sen. Mike Rounds, a Republican from South Dakota raised an amendment that would have established a sunset clause on the SAFER Banking Act if marijuana is rescheduled by the U.S. Drug Enforcement Administration, “so that the marijuana industry and their banks are not immune from the requirements every other industry has to face.”
Rounds then withdrew the amendment, saying he wouldn’t support the bill even if the amendment had been included.
An amendment by Republican Sen. Bill Hagarty of Tennessee that “would prevent the laundering of fentanyl and methamphetamine proceeds via marijuana sales” was ruled out of order.
Next steps for SAFER
The SAFER Banking Act is a revived and revised version of several previous cannabis banking reform bills to make it through the House but not the Senate.
Before amendments introduced Wednesday, the version put before the Senate Banking Committee would offer “safe harbor” for financial institutions such as banks and credit unions that transact with state-legal marijuana businesses.
However, those federally supervised institutions must still operate “in a safe and sound manner” and “have processes and procedures in place to identify fraudulent or illegal activity.”
Other provisions in the bill would:
- Prevent federal regulators from making banks close the accounts of state-legal marijuana businesses without a “valid reason.”
- Require the creation of “uniform guidance and examination procedures for depository institutions that provide financial services to state-sanctioned marijuana businesses.”
- Require new guidance “regarding providing financial services to hemp-related legitimate businesses and hemp-related service providers.”
Critics of SAFER have faulted the bill for maintaining Bank Secrecy Act requirements that mandate that banks monitor transactions for suspicious activity and file reports.
“Financial institutions will be required to file regular reports, requiring substantial resources to ensure compliance from financial and small businesses and demanding precious operational resources,” Sundie Seefried, CEO of Colorado-based cannabis industry financial services company Safe Harbor Financial, said in a Wednesday statement.
“Cannabis’ real golden goose is rescheduling,” Seefried added.
Impact of looming shutdown
If a government shutdown does occur, it’s anybody’s guess as to how long that shutdown might derail further progress on SAFER by lawmakers.
Leaving the shutdown risk aside, senators could now try to further amend the bill on the Senate floor before a vote, cannabis equity analyst Pablo Zuanic of New York-based Zuanic & Associates observed in a research note to clients last week.
If the bill does muster the 60 votes required to pass the Senate, Zuanic wrote, its journey through the House could involve “a prolonged process through mid-2024” or a more rapid passage “if it is included in a must-pass bill by year-end.”
Previous versions of the bill, formerly called the SAFE Banking Act, passed the House seven times, albeit when that chamber was controlled by Democrats.
However, Zuanic warned that the now Republican-controlled House has “other priorities.”
“It’s very difficult to handicap what’s going to happen over in the House,” Cresco’s Bachtell said.
Like Zuanic, Bachtell raised the possibility that the SAFER Banking Act could be attached to other legislation “that may have a higher likelihood of success.”
“That’s what the leadership will be evaluating in the days and weeks ahead, is, what gives this issue the highest likelihood of success?” said Bachtell.
Despite the political uncertainty to come, Bachtell struck an optimistic tone regarding overall bipartisan support for cannabis banking reform as both parties work on the bill.
“It feels like compromise can be achieved,” he said.
Solomon Israel can be reached at email@example.com.