Jesse Mondry
The Safe Banking Act, often known as the Safe and Truthful Enforcement Banking Act (SAFE Banking Act), is sorely wanted laws to handle the important difficulty of monetary providers being denied to marijuana companies that function within the state-legalized industries. We’ve written extensively in regards to the SAFE Banking Act over the previous a number of years. See here, here, here, simply to call just a few. With one other yr of Congressional motion (or inaction) earlier than us, let’s evaluation the SAFE Banking Act, its implications, and why it issues for marijuana companies, monetary establishments, and shoppers.
What’s the SAFE Banking Act?
The SAFE Banking Act has been in dialogue since 2013. It seeks to offer a authorized framework to allow monetary establishments to offer banking providers to cannabis-related companies although marijuana stays federally unlawful. Regardless of the tidal wave of legalization on the state stage, monetary establishments stay cautious of offering banking providers to those companies due to the state/federal battle of legislation and these establishments innate risk-avoidant nature.
This has created a scenario the place cannabis-related companies battle to entry banking providers, resulting in predatory preparations the place providers can be found, an incapability to boost capital, and leaving many licensed enterprise to function solely in money. This latter consequence has led to vital safety and security points for the line-level retail staff and prospects of retail hashish companies.
The SAFE Banking Act would defend monetary establishments that supply providers to marijuana companies from federal prosecution and regulatory backlash. It additionally should eradicate the chance of far-reaching civil RICO lawsuits the place a plaintiff seeks to snare a deep-pocketed financial institution. The SAFE Banking Act would make it vastly simpler for cannabis-related companies to entry banking providers, cut back their reliance on money, and create larger transparency for buyers, taxing authorities, and regulators.
Implications for the hashish trade
The SAFE Banking Act could be a major boon for the hashish trade. The cash-only nature makes these companies targets for crime and extra weak to robberies and burglaries. It additionally creates accounting and tax points and reduces transparency very important when looking for new capital buyers or when promoting (or shopping for) a marijuana enterprise. This laws is essential for america to actually cut back the unlawful hashish market and type a wholesome regulated market. However really reaching these objectives additionally requires reforming the tax code – i.e. the onerous results of IRC 280e.
Implications for monetary establishments
The SAFE Banking Act would do two vital issues for monetary establishments. One is permitting monetary establishments to earn money by offering providers to marijuana companies. And to take action with out the concern of legal or regulatory backlash. Until monetary establishments obtain authorized protections for servicing this trade — and no, the moldering FinCEN memo alone received’t lower it — it’s unlikely that they are going to ever achieve this.
Implications for shoppers
For shoppers, probably the most obvious implication is elevated security. As a result of these companies function solely in money, each they and their prospects are targets for criminals. Permitting prospects to make use of credit score and debit playing cards to make purchases would scale back the chance and enhance security. A second implication could also be decreased costs as a result of hashish companies could also be eligible for conventional enterprise financing to buy gear and so forth as a substitute of relying solely on non-public lenders and financiers.
What’s subsequent for the SAFE Banking Act?
The SAFE Banking Act has cleared the Home with bipartisan assist on six events however has gone nowhere within the Senate. Maybe that is the yr the laws lastly makes some headway. It’s sorely wanted.
