Is SAFE Banking a threat to cannabis-specific finance companies?

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Cannabis-focused finance, security and insurance company operators that emerged to fill gaps through federal prohibition have a strong message to the likely competition that will come should marijuana banking reform pass:

Bring it on!

Federal marijuana prohibition has prevented traditional insurance, banking and credit-card services from working with state-legal cannabis businesses, creating a dangerous overreliance on cash that has led to countless dispensary break-ins and robberies.

Now, there’s hope that the Secure and Fair Enforcement (SAFE) Banking Act – or some version of marijuana banking reform – could be on the table this upcoming lame-duck session of Congress.

If passed, it would open the way for large banks and financial institutions to service cannabis companies.

The Biden administration has also begun a review of marijuana’s status as a Schedule 1 drug under federal law, which could also pave the way for banks and other financial institutions to serve cannabis companies without fear of federal retribution.

Avis Bulbulyan, CEO of Los Angeles-based cannabis business development firm Siva Enterprises, is among those who don’t believe banking reform is likely to pass any time soon.

But when it does, it’s those cannabis-specific companies that will feel it the most.

“For some, it’s going to create an exit opportunity,” he told MJBizDaily via email.

“For others, it’s going pull the rug out from underneath them.”

MJBizDaily asked operators in the cannabis insurance, banking, security and compliance spaces to see if they perceive potential marijuana banking reform as a boon or a threat to their business.

Here’s what they had to say:

SHF Holdings: ‘Not bullish’ on SAFE

Founded in Colorado in 2015, SHF Holdings – formerly called Safe Harbor Financial – provides banking, lending and payment services to cannabis operators in all state legal markets.

This year, the company:

Tyler Beuerlein, SHF’s strategic business development officer, said he’s doubtful marijuana banking reform is on its way.

“I am personally not bullish,” he wrote in an email to MJBizDaily.

“The cannabis industry has consistently been used as a political pawn. … Furthermore, we are already banking and providing financial services to all state legal markets. The banking ‘crisis’ has largely already been solved by the private sector. We are proud to be leading that charge.”

But even if Congress eventually passes banking reform, Beuerlein said it won’t negatively impact SHF.

“This is and will remain a highly regulated industry,” Beuerlein noted. “SAFE would not change the federal legal status of cannabis.

“Additionally, there is no guarantee the branded card networks will enter to provide access to payment types like credit cards.

“I also expect regulatory bodies to hold any financial institution to the same oversight expectations they currently have in place.

“That is a long way of saying we expect to continue to thrive.”

Sapphire Risk Advisory Group: SAFE might reduce safety risks

Texas-based Sapphire Risk Advisory Group is one of the oldest licensed national security consultancies in the U.S. and provides its consulting and risk assessment services to cannabis cultivators, retailers and dispensaries, according to Chief of Staff Leo Falgout.

Generally speaking, marijuana reform is good for business, Falgout said in an email to MJBizDaily, because new markets bring new opportunities.

But one of the major security risks associated with the industry’s banking problems – its reliance on cash, which has led to high numbers of sometimes-violent robberies and break-ins – would be impacted by SAFE.

“Cash onsite can be a bigger security risk than any cannabis product,” Falgout wrote in an email to MJBizDaily.

While it wouldn’t solve every security problem, marijuana banking reform would reduce safety and security risks to stores and their employees.

“It would allow our clients to do what they do best – cultivate, retail, manufacturing – instead of worrying about cash handling to such an extent,” he wrote.

“Cash wouldn’t disappear, but one would expect to see manageable scenarios instead of entire rooms dedicated to it.

“Most traditional businesses own a single safe, while cannabis businesses often have a vault room or multiple safes.”

Simplifya: Already working with traditional banking

Founded in 2016 with Denver-headquartered law firm Vicente Sederberg, Simplifya is a regulatory and compliance software platform that serves licensed cannabis companies, financial institutions, consultants, lawyers, insurers and governments in more than 25 states.

According to Katrina Skinner, Simplifya’s general counsel and chief banking officer, federal reform such as SAFE Banking doesn’t directly play into how the company strategizes for the future.

“Federal reform is definitely going to make a difference and change the landscape, but I don’t think in the immediate, near-term future,” Skinner said in an interview with MJBizDaily.

When industrial hemp was legalized in 2018, for example, there were a couple of chaotic years before laws and regulations were clear, she said.

But even if marijuana were rescheduled or descheduled, state-by-state regulations would still be in force, she said, and Simplifya’s clients would still depend on the software.

When it comes to banking reform, Simplifya has already started working with financial institutions and regtech providers (regulatory processes management) that offer compliance services to financial institutions.

“Any reform is a game of inches,” Skinner said. “And that will create new opportunities for us and some of these other financial, regtech or fintech companies.

“All of this should create efficiencies. But I think the biggest difference will be that we will know what the rules are.”

For example, the Federal Financial Institutions Examination Council (FFIEC) – which is composed of federal banking regulators – hasn’t been updated since 2014, Skinner said.

Since then, financial institutions that work with marijuana companies have had to regularly file so-called suspicious activity reports – even if there aren’t any signs of possible money laundering or fraud.

That’s because these institutions are working with the marijuana industry.

“Maybe they’ve gotten enough information that says we don’t need to do that,” Skinner said. “That reporting is very cumbersome for financial institutions.

“So if that goes away, that would be awesome.”

Frontier Risk Group: SAFE could expedite reinsurance capacity

James Whitcomb, a former CEO of multistate cannabis operator Parallel, launched the tech-enabled insurance company Frontier Risk Group in October.

The company uses technology to assess the risks associated with operating marijuana companies, from cultivation and beyond, to lower losses incurred by reinsurance companies.

“And therefore, I can maybe get you better pricing on your property policy next year, or your workers’ comp policy, or your product liability policy,” Whitcomb told MJBizDaily.

“Or it could go in the other direction and we can see data that says that these are, on a relative basis, more risky operators, and therefore that’s something that reinsurance partners should be aware of.”

There are some existing traditional insurers working in the cannabis space, but there’s a limited capacity for reinsurers, according to Whitcomb.

That means the entire industry is underinsured, he said.

If some version of SAFE Banking passed, it could include language from the Clarifying Law Around Insurance of Marijuana (CLAIM) Act.

The act, introduced by recently reelected U.S. Sen. Bob Menendez, R-New Jersey, would protect insurers from being penalized for working with state licensed cannabis companies. The measure has not yet been passed into law.

Whitcomb said he welcomes the competition.

“At the end of the day, this market is so terribly underinsured that I think it’s the consumers that are going to feel the ultimate pain there,” he said.

“The reality is, I can sit around and talk about building an insurance brokerage for cannabis, but if I can’t figure out a way to increase the reinsurance capacity, which is a multi-tens of billions of dollars’ need, it’s just an idea, right?

“If SAFE goes through, it will just make more resinsurance capacity enter the market more quickly.

“And that’s a good thing for everyone.”

Kate Robertson can be reached at