I’m fairly certain that extra ink has been spilled on the Safe and Truthful Enforcement Act (“SAFE Banking”), than another proposed hashish legislation. It simply received’t cross and it simply received’t die. Particularly, SAFE Banking was introduced in 2017 and it handed the Home seven occasions (seven occasions!) with bipartisan help since 2019. The general public likes it too: right here’s a November 2022 Data for Progress poll revealing that “By a +65-point margin, voters help making certain that banks don’t discriminate towards reliable marijuana-related companies.” This invoice ought to cross, proper?
It’s getting nearer. SAFE Banking will lastly go to mark-up this week within the Senate Banking Committee. That Committee is getting ready to vote earlier than October 1, though what they’ll be voting on at this level isn’t totally clear. (For some chatter on that, take a look at this Marijuana Moment piece from final Friday.) However let’s assume that SAFE Banking, after mark-up, holds onto its key tenets. It might forestall federal banking regulators from:
- prohibiting, penalizing or discouraging a financial institution from offering monetary providers to a reliable state-sanctioned and controlled hashish enterprise, or an related enterprise (resembling a lawyer or landlord offering providers to a authorized hashish enterprise);
- terminating or limiting a financial institution’s federal deposit insurance coverage primarily as a result of the financial institution is offering providers to a state-sanctioned hashish enterprise or related enterprise;
- recommending or incentivizing a financial institution to halt or downgrade offering any form of banking providers to those companies; and
- taking any motion on a mortgage to an proprietor or operator of a cannabis-related enterprise.
Would any of that be really useful? In a vacuum, sure. However we don’t stay in a vacuum, and if one thing like this passes you may anticipate a bunch of collateral points. Most worrisome to me is that SAFE Banking might in the end improve AML/BSA compliance burdens for monetary establishments with hashish shoppers. A whole lot of them already offer services to state-licensed marijuana companies: these banks are properly versed within the old-as-dirt 2014 FINCEN guidance on working with business. If SAFE Banking passes, we’ll certainly get further guidelines and steering from the Treasury Division and elsewhere. Watch out what you want for.
This challenge was highlighted in a well-written American Banker piece revealed yesterday (it’s paywalled, however they’ll commerce you a freebie for an electronic mail). In that article, I and others additionally opined that SAFE Banking isn’t as important as when the legislation was first launched in 2017. It’s because SAFE Banking wouldn’t really remedy loads of hashish banking points, past entry to banking providers (which is already form of solved). Particularly, it wouldn’t:
- grant entry to SBA packages (there’s another bill floating round for that)
- improve lending choices in any direct or discernible sense;
- grant U.S. hashish corporations entry to public capital markets (sorely wanted);
- require Visa, Mastercard, and so on. to work with the hashish business (tremendous sorely wanted); or
- get rid of IRC § 280E (though this will happen via rescheduling).
Do I nonetheless hope SAFE Banking passes? I believe so. The satan is within the particulars with one thing like this. And, as I advised American Banker:
Proper now, most states solely have small credit score unions working with the business, and most of those credit score unions solely provide primary service provider accounts with comparatively excessive charges. A couple of have extra expansive choices, like gear loans, however usually hashish corporations don’t have entry to the total suite of providers that different, equally sized commodities companies have and so they pay extra for these restricted providers.
In that article, I additionally talked about that I’ve realized to not get my hopes up with SAFE Banking. Even when this invoice will get out of Committee, it might want a ground vote, after which reconciliation with regardless of the Home is considering on the subject. That seems like miles and miles away, particularly right now when Congress is struggling to maintain the lights on.
I don’t imply to be discouraging. In reality, it’s simpler to really feel OK while you consider SAFE Banking as not the largest deal. Nowadays, it’s actually not.