On September 25, 2019, the U.S. House of Representatives overwhelmingly passed the Secure And Fair Enforcement (SAFE) Banking Act (SAFE Act) by vote of 321 to 103. If it passes the U.S. Senate and is signed into law, it would prohibit federal banking regulators from penalizing a depository institution simply because the bank provides services to legitimate marijuana-related businesses (e.g., a cannabis grower, processor, and/or dispensary that is duly licensed by a state with an established medical and/or adult-use cannabis program). The bill would also stop regulators from terminating or limiting deposit insurance for banks that serve cannabis (including hemp) businesses.
The bill is significant for a number of reasons. First, this is the first standalone cannabis reform bill that has reached the House floor. Second, this legislation would help address one of the cannabis industry’s primary challenges: finding financial institutions that will take them on as customers. Even in states with robust medical and/or adult-use cannabis programs, banking options are extremely limited (perhaps only one depository institution available in some states), and the banking options that are available are quite expensive. Third, once implemented, the bill could pave the way for commercial lending and capital markets opportunities for plant-touching US entities. Fourth, and finally, the bill would also address the hemp industry’s continued banking woes. Despite hemp now being federally legal as a result of the 2018 Farm Bill, many hemp businesses still struggle to find depository institutions that will take them on as customers.
Despite the significance of the SAFE Act passing the House, it seems that the measure could face an uphill battle on the other side of the Capitol. Senate Majority Leader Mitch McConnell (R-Ky), while a strong proponent of hemp, has not yet signaled a willingness to take up a measure that would also benefit the marijuana (hemp’s “illicit cousin,” as McConnell calls it) industry. Senate Banking Committee Chairman Mike Crapo (R-Idaho) has said that he wants his panel to take up the measure this year, but again, the bill does not yet have a clear path to the Senate floor.
Even if the measure goes to the full Senate, some Senate Democrats have signaled that their votes could be contingent on the banking fix being incorporated into a broader cannabis reform bill that addresses issues like decriminalization, criminal justice reform, and investment opportunities for minority-owned and women-owned businesses. Although House Democrats made similar overtures before the SAFE Act vote, all but one member of the Democratic caucus ended up voting for the bill.
Analyst predictions of the SAFE Act’s chances in the Senate vary wildly. Our take is that the bill has about a 25 percent to 33 percent chance to pass the Senate this year. While President Trump has not yet indicated if he would sign the bill, we believe he would.
We are continuing to monitor these developments and will provide updates, as appropriate.
