SAFE Banking Act Passes House, Faces Uncertainty In Senate

SAFE Banking Act Passes House, Faces Uncertainty In Senate

The Secure and Fair Enforcement Banking Act, also known as the SAFE Banking Act, passed the House earlier in September by a vote of 321 to 103. This is one step closer to allowing the cannabis industry, which is legal in some states but illegal federally, access to banking and financial services — a big win for cannabis retailers as well as banks and credit unions.

The lack of access to banking is cited time and again by the cannabis industry as a barrier to doing business. Through their votes, the Democratic-controlled House of Representatives is working to provide protection to banks that choose to work with the cannabis industry. The bill would allow “safe harbor” for financial institutions, as well as other ancillary businesses, that might do business with companies associated with the cannabis industry.

Before the vote, House Majority Leader Steny Hoyer said in a statement that while he doesn’t believe the Safe Banking Act goes far enough, he’s “proud” to bring the bill to the House floor.

Right now, banks that provide services to state-regulated marijuana businesses could potentially face criminal and civil liability under some banking statutes. This basically forces cannabis companies to operate on cash, which is reminiscent of the black market methods of doing business. “It’s an invitation to theft, it’s an invitation to money laundering already, it’s an invitation to tax evasion, and it stifles the opportunities of this business,” Democratic Rep. Ed Perlmutter of Colorado, a sponsor of the bill, said on the House floor Wednesday before the vote. Perlmutter also argued that the bill would help reduce violent crime against employees and store owners.

On the flip side, however, analysts warn that the measure most likely won’t become law in 2019, citing the tough road ahead in the Republican-controlled Senate. In a note before the House vote, Ian Katz, an analyst at Capital Alpha Partners, noted that the odds weren’t great, but things could look brighter “if we see meaningful signals from the Senate in the next few weeks.”

Steve Hawkins, the Marijuana Policy Project’s executive director, interprets the vote as an indication that there is a chance that other cannabis-related legislation will move ahead at the federal level, stating that the vote shows that Congress is “more willing than ever to support and take action on sensible cannabis policies.”

Meanwhile, Representative Patrick McHenry, a Republican from North Carolina, opposed the bill, arguing that Congress needs to have a debate on whether or not cannabis should be considered a schedule 1 substance under the controlled substances act, noting that the banking provision “could expose the current financial system to illicit activity.”

A companion banking bill in the Senate was introduced in April by Democratic Senator Jeff Merkley (Oregon), and Republican Senator Cory Gardner (Colorado). It hasn’t been voted on by the Senate Banking Committee, although they held a hearing in late July on the issue. Republican Senator Mike Crapo (Idaho) chairs the banking committee. Crapo told Politico in September that he would hold a vote on cannabis banking legislation but wouldn’t confirm whether or not he would work off of Merkley and Gardner’s bill.  The SAFE Banking Act includes a provision that would prevent the return of Operation Choke Point, which was a program during President Obama’s tenure that involved investigating banks for doing business with payday lenders and firearms dealers — something mentioned by Crapo at the July hearing. Some see the provision as a way to sweeten the deal for the Republicans.

Regardless, Senate Majority Leader Mitch McConnell (Kentucky) and Crapo do not currently support the federal legalization of cannabis, although it is currently legal for adults in 11 states and Washington, DC, and cannabis has been decriminalized in another 15 states. McConnell’s home state of Kentucky has a flourishing hemp industry, and there are provisions that aim to protect financial groups that serve that side of the industry. Hemp is legal federally with the passage of the 2018 Farm Bill, but banking institutions haven’t been quick to embrace that piece. Whether a result of bias or stigmas relating to hemp’s “cousin”, marijuana, widespread progress in that arena has been slow.

Following the passing of the SAFE Banking Act, many of the Democrats who supported it are also calling for the legalization of the drug. “This bill is but one important piece of what should be a comprehensive series of cannabis reform bills,” Rep. Maxine Waters of California said Wednesday on the House floor, adding that “it’s long overdue that Congress to address the unjust criminalization of marijuana use.”

In the end, many in the cannabis industry believe banking-related legislation will eventually become law, even if 2019 doesn’t prove fruitful.

About Brian Ellis

With 6 years' experience in business journalism, Brian is the person we turn to for anything related to the business of cannabis. His news coverage spans topics including marijuana business and finance. Brian's work features on, and