The Secure and Fair Enforcement (SAFE) Banking Act, was reintroduced in Congress, on March 19th. A version of the bill in 2019 garnered 321 votes in its favor, and 103 in rejection. However, the bill floundered in the then Republican-controlled Senate. There is renewed optimism now that Democrats hold a slight control of the Senate.
The bill seeks to offer federal-wide protection from prosecution for US bankers that serve the cannabis market.
Cannabis companies must be cautiously delighted but deepen lobbying on federal-wide uniform rules; insurance access rather than just retail banking and robust data capture.
The biggest dilemma of the US cannabis market is that trade, consumption, or banking for participants is lawful in select states but there is no federal blanket protection. From 2012, adults over the age of 21 can lawfully use marijuana in 15 states and Washington DC. Additionally, 36 states have legalized the usage of medical cannabis meaning – loosely – the majority of Americans can possess marijuana for medical or recreational purposes.
This arcane patch of rules is a headache to marijuana market participants. “The biggest risk the cannabis industry faces is uncertainty. Not only around regulation but around the nature of the lawsuits that could arise,” an authoritative report about the industry, compiled by New Dawn Risk consultancy, states.
Marijuana companies in the US incur millions of dollars in consulting lawyers to weave through a maze of intimidating, non-uniform state laws that can change from state to county. For example in Pennsylvania, a web of rules means marijuana traders have to part ways with up to $2 million upfront in paperwork and proof of assets alone.
So the re-introduction of the SAFE Act is a very important opening for marijuana companies to lobby for a law that gives blanket federal protection. That way, American marijuana corporations get a competitive footing and don’t have to coy around the rules, and list on indexes in nearby liberal jurisdictions like the Toronto Stocks Exchange in Canada.
We spoke to Andrew Bowden, CEO of Item 9 Labs Corp, who had this to say:
“We believe the passing of the SAFE Banking Act will advantage all U.S. cannabis operators. For Item 9 Labs, we’ll see direct benefit in access to further financing our Arizona cultivation site buildout and cannabis products to fulfill our customer demand. With our upcoming merger with OCG, Inc. and their Unity Rd. franchise, the robust pipeline of prospective franchise partners will gain additional access to financing – much like SBA loans assist other franchise concepts. We also expect the passing will open the broader exchanges, like NASDAQ and NYSE, with investment banking and institutional investors able to participate, and make it easier for U.S. citizens to purchase shares.”
Don´t forget insurance
The re-introduced bill mandates that federal banking regulators cannot “terminate or limit the deposit insurance or share insurance” or “take any other adverse action against a depository institution” just because it provides banking services to licensed cannabis corporations.
Cannabis companies must not fall into the trap of focusing their lobbying too heavily on retail banking whilst overlooking insurance. As cannabis cultivation, harvesting and trade heat up in the US domestic market, don’t forget that marijuana is a business that´s galloping beyond our shores. China, as bullish as ever, already plants 50% of the total area of cannabis grown in the world today. The World Intellectual Property Organization, states that 306 of the 606 patents involving cannabis today are in the hands of Chinese corporations and individuals.
It is almost given that US marijuana businesses will venture abroad to pick virgin markets or diversify harvests, and this is where insurance shines. Global and domestic US marijuana logistics are complex and fraught with risks of shipping, fire, or climate change disrupting harvests. The legalized cannabis industry in the US would pay $1 billion in annual insurance premiums if the trade was insured to levels offered for other sectors.
Lobbying must intensify to make it easier for cannabis corporations to obtain legal insurance at competitive rates thus they can safely hire more workers and expand operations. As a National Association of Insurance Commission report stated in 2018: “Lack of insurance for the industry adds layers of unnecessary risk and exposure for all market participants.”
Data is savior
The re-introduction of the SAFE Act bill could unleash an avalanche of pent-up data that will enrich both cannabis traders, healthcare agencies, users, and bankers.
Right now due to patchwork of mysterious rules, the cannabis sector runs by word-of-mouth figures, and insider chats (not structured data). “Thousands of employees and businesses across this country have been forced to deal in piles of cash for far too long,” Rep. Perlmutter, the pusher of the re-introduced bills said via a news release.
Without a modern, high-quality data registry on the marijuana market, it is double difficult for retail insurance companies to fairly price packages, or for cannabis traders to haggle for competitive interest rates. Without data, insurers are piloting in the dark. Cannabis growers lose, and health agencies can´t track the impact on consumers.
The California Cannabis Industry Association (CCIA) is calling for cannabis businesses to join them in imploring Speaker Pelosi to prioritize the Secure and Fair Enforcement Banking Act (SAFE Banking Act).
Click this link to add your company name and logo to the letter that will be sent to Speaker Pelosi later today. The cutoff time of today, August 4 at 5 pm is quickly approaching. Act now.
What is the SAFE Banking Act?
The SAFE Banking Act is a measure that will allow financial institutions, like banks and credit unions, and insurance providers to work with state-legal, legitimate cannabis businesses without fear of federal prosecution.
Currently, these service providers are not able to work with cannabis businesses because cannabis remains federally illegal under the Controlled Substances Act. More than 30 states, Washington D.C., Guam, and U.S. Virgin Islands have enacted either medicinal or recreational legalization amendments. Cannabis businesses deserve the same access to banking and insurance services as any other legitimate business. The federal government cannot ignore the will of the people, and lawmakers need to hear from you to know that you want them to support the SAFE Banking Act.
This is the email statement from the CCIA about the plan to send a letter:
Now is the time to raise our voices and fight for SAFE Banking on behalf of the entire cannabis community. We have a narrow window to implore Speaker Pelosi to prioritize this legislation. Please lend your name to this crucial effort by 5 pm on 8/4!
CCIA and The Liaison Group have been working tirelessly behind the scenes on SAFE Banking. Our efforts in the spring with California Delegation leaders Correa, Porter and Lieu, were crucial to SAFE making it into the Heroes Act.
SAFE Banking has passed out of the House on two occasions, the latest being part of the Heroes Act (H.R. 6800), however, this bill is yet to be passed by the Senate and signed into law. We need our leadership in California to negotiate that SAFE language remains in the COVID relief act!
We need SAFE Banking to ensure that BIPOC (Black, Indigenous, People of Color) owned businesses, especially women, have equitable access to funding and for the safety of our employees and our communities. We know that the fight for social justice and cannabis reform are deeply intertwined and that cannabis justice is racial justice. We cannot hope to repair our communities through reinvestment without the appropriate tools, including SAFE Banking.
CCIA will be submitting a letter on behalf of our members to urge Speaker Pelosi to help fight for SAFE Banking. Please use the link below to add your company name and logo by 5 pm 8/4.
We’re in this fight together!
Below is a copy of the letter that the CCIA will send to Speaker Pelosi today:
August 5, 2020
The Honorable Nancy Pelosi
U.S. House of Representatives
Washington, DC 20515
Dear Speaker Pelosi:
For the safety of our employees and our communities, we the undersigned implore you to ensure the SAFE Banking Act remains part of COVID relief. As you know, the SAFE Banking passed out of the House on two occasions. The first was standalone bill H.R. 1595 and the second as part of the Heroes Act (H.R. 6800), however, this bill is yet to be passed by the Senate and signed into law. Upon reviewing the Senate response to Heroes, we were disappointed to see SAFE Banking not included, but want to make sure that this important piece of legislation is part of a final negotiated package. We need SAFE Banking to ensure that BIPOC (Black, Indigenous, People of Color) owned businesses, especially those owned by women, have equitable access to funding. Most notably, BIPOC owners who have been most adversely impacted by the pandemic compared to their white counterparts. Below are just some reasons among many that stress the importance of this relief.
- Los Angeles’s social equity program, one of the few in the state, was designed to promote equitable ownership in the cannabis industry, but this program has had considerable challenges due to an imbalance of wealth. Although it was intended that Social Equity applicants have the opportunity to be first to market, a group of said applicants were forced to file a lawsuit to achieve fairness in a flawed process, which has now been settled. This is just the first step in an attempt to achieve equity. The majority of Social Equity applicants have not been able to afford the delayed process, nor the start-up costs associated with launching a cannabis business.
- BIPOC operators lack access to the capital that is essential to start cannabis businesses, so establishing loan programs would help with this burden. However, even if the SBA were to set up a loan program, this could not be effectuated without access to banks.
- Unfortunately, in the states that have equity programs written into their cannabis statutes, BIPOC owners fall prey to predatory business arrangements in which larger cannabis companies will be effectively running the businesses through a management services agreement while the BIPOC owner becomes a figurehead.
- Women and BIPOC face significant barriers to accessing investment dollars. Every year women of color get less than 1% of total venture capital funding. Further, data from 2019 indicates that only 200 Latinx and Black individuals nationwide were able to raise over $1 million in venture capital. This number is for all industries, not just cannabis.
- The bill is unquestionably part of a holistic approach to ending the War on Drugs, and its devastating effects on communities of color. The longer that BIPOC entrepreneurs have to wait to enter this industry, the greater disadvantage they are at because of larger companies’ ability to build their brands and customer loyalty.
- SAFE Banking reduces cash motivated crimes. Cannabis businesses and employees are routinely targeted, robbed, and sometimes attacked because of the large amounts of cash that they are forced to deal with.
- Lastly, SAFE Banking as included in the Heroes Act (H.R 6800) calls for two diversity studies for the cannabis industry. While these studies will largely tell us what we currently know (that non-white representation in the industry is disproportionately low), this will create an important baseline for future conversations around legalization and ensuring the industry is equitable.
We know that the fight for social justice and cannabis reform are deeply intertwined and that cannabis justice is racial justice. We cannot hope to repair our communities through reinvestment without the appropriate tools, including SAFE Banking. The events of recent months have shown us that this bill is more important than ever. We urge its swift passage to help our economy and our communities.
California Cannabis Industry Association (CCIA)
CCIA Board President
Senior Vice President Harborside
CCIA Board Vice President
New laws expanding the medical marijuana program in Louisiana went into effect on August 1. The state’s medical marijuana program has been criticized for being too limited and too restrictive since the program was established in 2016, but the three laws that went into effect on Saturday aim to improve the situation.
Louisiana’s medical marijuana program may have been established three years ago, but patients were not granted access to medicine until August of 2019 when the first round of the product became available. Home cultivation remains illegal for the more than 4,000 registered medical marijuana patients. Only two facilities are allowed to cultivate medical cannabis for the entire state, and only nine pharmacies are licensed to distribute it to patients.
House Bill 819
Previously, the number of physicians that were allowed to recommend medical marijuana therapy was limited and so were the conditions that would qualify a person for the program. Under the new regulations established by HB 819, any physician licensed by the state of Louisiana has the authority to recommend medical cannabis to his or her patients. Previously, only physicians registered with the program were permitted to discuss it with patients. As a result, the program struggled to recruit physicians to participate.
This legislation also expands conditions which qualify a person to apply for the program and puts more emphasis on the patient-physician relationship by opening the program’s door to any person suffering from “any condition” which is deemed to be debilitating by the physician. Under the prior regulations, only patients suffering from a certain list of conditions, like cancer, epilepsy, or HIV, could qualify for the medical marijuana program.
House Bill 418
Even though more than half of the states in America have legalized some form of cannabis use, whether medical or recreational, the plant and its derivatives remain federally illegal. House Bill 418 aims to provide extra protection for those businesses that operate within the parameters of Louisiana state law. This legislation certifies that: “Any facility that is licensed by the Louisiana Department of Health and has patients in its care using medical marijuana shall be exempt from the prohibitions provided in this Section for possession and distribution of marijuana.”
House Bill 211
House Bill 211 addresses another major restriction placed on state-legal cannabis businesses by the federal government. While cannabis remains illegal under the Controlled Substances Act, businesses licensed by the federal government, like those that provide banking services, are not able to work with any cannabis-related company without fear of federal prosecution.
Unlike federal regulations, the enactment of House Bill 211 is meant to motivate financial institutions to service those cannabis-related businesses that are licensed and operating legally in the state of Louisiana.
This legislation sets the expectation that the state will not: “Penalize a state bank or credit union for providing financial services to a cannabis-related legitimate business or service provider solely because the account holder is a cannabis-related legitimate business or service provider or is an employee, owner, or operator of a cannabis-related legitimate business or service provider.”
Federal Law: SAFE Banking Act
Many proponents think that federal lawmakers should take a page out of Louisiana’s playbook regarding the relationship between financial institutions and legitimate cannabis businesses. As long as cannabis remains illegal under federal law, banks that choose to work with cannabis industry businesses are at risk even though those businesses are operating legally under state law.
The United States Congress is currently considering legislation known as the Secure and Fair Enforcement Banking Act (SAFE Banking Act) which would effectively lift the restrictions preventing banks and insurance service providers from openly working with cannabis businesses.
The House has already approved the SAFE Banking Act, and the legislation is currently being held up by the Senate Committee on Banking, Housing, and Urban Affairs. Some Senators may need encouragement from you, the constituents, to support the SAFE Banking Act. NORML has made it incredibly easy to contact your state’s Senators to let them know that you want them to approve the SAFE Banking Act. Click here to be redirected to NORML’s website where all you have to do is enter your information and it will automatically send your letter of support.
On Monday, the Republican-controlled Senate rolled out new Coronavirus relief legislation—a counteroffer to the $3.4 trillion package unveiled by House democrats back in May. The Senate’s relief bill comes with a much smaller price tag of only $1 trillion dollars, which it achieves by slashing much of the benefits proposed by the House.
In addition to the dramatic cuts to the weekly enhancements of state unemployment benefits and safety net programs proposed in the House’s version (The HEROES Act), the Senate’s package does not include language that would protect banks who service the legal cannabis industry.
SAFE Banking Act
The Secure and Fair Enforcement (SAFE) Banking Act, which was originally proposed as a standalone bill sponsored by Rep. Ed Perlmutter (D-CO), would allow legitimate legal cannabis businesses access to financial services regardless of federal prohibition. Despite being initially approved by the house months ago, the Senate Banking Committee has continued to take no action on the bill. In order to circumvent the Senate Banking Committee, House Democrats included a version of the SAFE Banking Act in their Coronavirus relief bill.
According to the summary provided in the HEROES Act, the SAFE Banking section would “allow cannabis-related legitimate businesses, that in many states have remained open during the COVID-19 pandemic as essential services, along with their service providers, to access banking services and products, as well as insurance.”
The executive director of the National Cannabis Industry Association, Aaron Smith, tweeted out his approval of SAFEs inclusion in the House’s relief bill, stating: “On behalf of the legal cannabis industry, we commend the congressional leadership for prioritizing public health and safety by including sensible cannabis banking policy in this legislation.”
Criticism From Senate Republicans
Despite the fact that forcing essential businesses to continue operating as cash-only during a global pandemic seems counterintuitive to stopping the spread of the virus, Senate Republicans have leveled criticism at the addition of marijuana banking protections to the Coronavirus relief bill.
Senate Majority Leader Mitch McConnell has been particularly vocal about his opposition to including protections for cannabis businesses in any relief package, stating: “I am opposed to non-germane amendments, whether it’s funding for the FBI building…or other non-germane amendments in the House bill like marijuana studies or aid to illegal immigrants…”
McConnell’s disapproval is not only aimed at the germaneness of the SAFE Act being included in the House’s relief legislation, but also at the diversity report provisions that it contains. Back in May, McConnell gave a speech on the Senate floor where he responded to the passing of the House’s HEROES Act. During it, McConnell sardonically referred to the section on marijuana banking protections as “the cherry on top.”
He continued in a similar tone: “Let me say that again, Democrats’ proposed coronavirus bill includes taxpayer-funded studies to measure diversity and inclusion among the people who profit off of marijuana.”
The Future of the SAFE Banking Act
As of now, it is unclear whether or not House Democrats will push for a section on cannabis banking protections to remain during the upcoming bicameral negotiations that will take place to merge the two chambers bills into one.
As for the Standalone bill, there is no reason to think the Senate Banking Committee will take further action any time soon.
A coalition of the top financial regulators in 13 states is demanding congressional action to protect banks that serve marijuana businesses.
In a letter sent to congressional leaders late last week, the regulators stressed that conflicting state and federal cannabis laws have inhibited economic growth, created confusion among state banks and credit unions and jeopardized public safety.
“It is incumbent on Congress to resolve the conflict between state cannabis programs and federal statutes that effectively create unnecessary risk for banks seeking to operate in this space without the looming threat of civil actions, forfeiture of assets, reputational risk, and criminal penalties,” the regulators wrote.
“While Congress has taken some action, such as the Rohrabacher amendment prohibiting federal funds being used to inhibit state medicinal marijuana programs, this has been an impermanent approach that requires a permanent resolution.”
Finance officials from Alaska, Connecticut, Hawaii, Louisiana, Michigan, Montana, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Utah and Washington State signed the letter.
One of the factors that prompted the letter was Attorney General Jeff Sessions’s decision earlier this year to rescind the Obama-era “Cole memo,” which offered some enforcement guidelines for federal prosecutors when it comes to marijuana laws. Rescinding the guidance led to “uncertainty about banks’ ability to serve this industry without running afoul of federal statutes,” the regulators wrote.
The letter also recognized that this coalition is not alone in its demand for clarity around banking and cannabis policy.
In June, a bipartisan group of 12 governors called on lawmakers to pass the STATES Act, a bill that amends the Controlled Substances Act to create an exemption for state-legal marijuana activity. That bill would effectively protect banks dealing with cannabis businesses.
“Our states have acted with deliberation and care to implement programs through thoughtful and comprehensive legislation and regulations,” the governors wrote. “Our citizens have spoken, we are responding. We ask that Congress recognize and respect our states’ efforts by supporting and passing the STATES Act.”
Confusion in the finance industry over marijuana policy appears to be coming to a head in the United States. As federally backed banking institutions continue to reject clients who deal in the marijuana industry, more businesses are turning to a handful of institutions that are willing to serve cannabis growers, processors and retailers—but the regulators said that’s only a temporary solution.
One example of the consequence of state and federal policy conflicts was recently reported by Marijuana Moment. A candidate running for a Florida agricultural commission seat was told that her Wells Fargo account would be closed after the bank discovered donations from “lobbyists from the medical marijuana industry.”
“A majority of states now have medical marijuana programs and it has become increasingly necessary to craft policy to respond to emerging challenges in this rapidly growing industry,” the new letter from financial regulators concludes. “We must work together to look for solutions rather than avoiding this challenge and ignoring the new policy landscape.”
See the original article published on Marijuana Moment below:
State Financial Regulators Push Congress To Fix Marijuana Banking Problems