Safe Banking Act of 2021: Potential to Provide Cannabis Industry Access to Financial Services, but Passage in The Senate Remains Uncertain

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On April 19, 2021, the U.S. House of Representatives once again passed H.R. 1996, the Secure and Fair Enforcement (SAFE) Banking Act of 2021 (the “Act”). This is now the fourth time that the Act has passed the House in one form or another, however, this is the first time that a Democratic Senate and president were next up on the path to the Act becoming a law. Democratic control does not mean automatic support and smooth passage. While bipartisan support has grown over the years, there are still a number of Senate Republicans that oppose any action on cannabis and Democrats that want further concessions. While the Act would represent a big shift in the thinking regarding cannabis in the United States and the industry’s access to financial services, there are still significant roadblocks that stand in the way.

The purpose of this Client Alert is to alert clients­—particularly those clients that are directly or indirectly involved in the cannabis industry—to the potential for increased access to financial services, but also the obstacles still in the way of this coming to fruition.

The Act provides protections from money laundering laws for any proceeds derived from state-legal marijuana businesses. This will get cash off the streets and into the financial system which is built to root out fraud and illicit activity. The Act also includes protections for hemp and hemp-derived CBD related businesses, which still struggle in accessing financial services despite the legalization of hemp in the 2018 Farm Bill. The current version of the Act would create a safe harbor for depository institutions that provide financial services to cannabis-related legitimate businesses (CLBs) or their service providers. Cannabis remains an illegal drug under federal law, yet 47 states and the District of Columbia, which account for 97.7% of the U.S. population, have legalized cannabis for limited access (low THC) medical purposes or recreational use. This means that with such an overwhelming majority of states and people having access to these products, there is an increased need for financial services available to providers in this industry.

While Republican detractors are an issue, the real issue lies with the Democratic Senate’s overall agenda regarding cannabis. While then Senate Majority Leader Mitch McConnell would not introduce the Act to the Senate floor when it passed the House in 2019, now Senate Majority Leader Chuck Schumer is much friendlier to introduction of the Act, but it still isn’t a guarantee that he will introduce the Act expeditiously. Senator Schumer has shown reservations about the Act. He is an advocate of federal legalization of cannabis and has indicated that he, Senator Ron Wyden, and Senator Cory Booker intend to introduce a federal legalization bill to the Senate floor sometime soon. He has voiced concerns that, in light of the federal legalization bill, the Act may not be broad enough. Senator Schumer stated that he hopes for a more comprehensive bill that includes “things that deal with banking and finance, although we certainly think that we ought to make sure that the communities that have been most affected by these draconian laws get the benefits here, and we want to make sure that there are reinvestment initiatives and it doesn’t all go to the big shots, that smaller businesses and minority businesses get a chance to be involved once marijuana is legalized.” Senator Schumer has intimated that he may suggest that the Act be combined with a federal legalization bill to get it to the floor. The issue with that is the Act would take much longer to get introduced to the Senate. Again, this is of course a step in the right direction, but trying to completely overhaul federal marijuana and sentencing laws will only further delay the passage of the Act and keep the potential financial services out of the hands of people that need them.

No action, however, is expected to occur until Senators Schumer, Booker and Wyden unveil the details of their effort to fully legalize cannabis. Although that effort likely does not have a chance at success, it will take precedent in Democratic messaging before the Senate turns its sights to finding a path forward with the Act. Their proposal will include aspects of the Act, as well as the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act, a bill House Judiciary Chair Jerrold Nadler also is expected to reintroduce. Several Democratic Senators remain opposed to full legalization of cannabis, as do most Senate Republicans. Democrats know they will not have the votes to pass a legalization bill, but will want to demonstrate their commitment to the issue.

Senate Banking Committee Chairman Sherrod Brown has also expressed concerns about the Act. Senator Brown stated that the Banking Committee has “been too much about Wall Street and not enough about housing, not enough about rural and urban affairs and people’s everyday economic lives.” He believes that the marijuana banking reform needs to come with sentencing reform, as well, to support the needs of those most affected by the criminalization of marijuana. This means a broader bill, and it would force the Senate Judiciary Committee to consider it also before reaching the floor. While President Biden has not taken a firm footing on a position on legalizing cannabis, he has stated that it should not be considered criminal to use it. While it’s unclear what bipartisan support Senator Brown may gain for his efforts with sentencing reform, it is clear the Democrats likely have the votes and path to pass the Act. This could happen as a standalone bill, but the more likely scenario may be attaching it to a must-pass piece of legislation like a year-end appropriations bill to fund the government. This effort to push it across the finish line, however, could slide to 2022.

So, while efforts and steps are being taken in the right direction in providing financial services to the cannabis industry, there are many obstacles on the road ahead, not the least of which is the exact parties attempting to pass the Act into law in the first place.


This alert should not be construed as legal advice or a legal opinion on any specific facts or circumstances. This alert is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult your attorney concerning any particular situation and any specific legal question you may have. We are working diligently to remain well informed and up to date on information and advisements as they become available. As such, please reach out to us if you need help addressing any of the issues discussed in this alert, or any other issues or concerns you may have relating to your business. We are ready to help guide you through these challenging times.

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