We have big news to share: Just now, the U.S. House of Representatives approved the SAFE Banking Act (H.R. 1595) in a 321-103 floor vote! Today’s vote was historic, as the SAFE Banking Act is the first standalone cannabis bill to ever receive a full vote in Congress.
This legislation would prevent federal financial regulators from punishing financial institutions that provide services to state-legal cannabis businesses. Currently, most banks are unwilling to work with the cannabis industry because they fear federal prosecution. A version of this legislation has been introduced in the Senate (S. 1200) and currently has 33 cosponsors.
As more states implement and expand cannabis-related programs, Congressional action is urgently needed to provide clear banking policies, which would reduce the illicit market, promote public health and safety, increase consumer safety standards, ensure broader patient access, help with business transparency and compliance, and reduce safety risks associated with running high-volume, cash-only businesses.
It is also important to recognize that the SAFE Banking Act, if passed by the Senate and signed into law by the President, would strengthen efforts to increase the diversity of the cannabis industry. Many states that have legalized cannabis for adults have launched efforts to ensure that there are economic opportunities for communities of color that have been most severely impacted by marijuana prohibition. Access to capital remains an obstacle to this goal, and the SAFE Banking Act would help to address this problem.
MPP is proud to support this legislation, and we’d like to thank all of our allies who worked so hard to get this bill to a House floor vote. We’d also like to thank you, our supporters, for reaching out to your representatives on behalf of the SAFE Banking Act.
Onward to the Senate!
The emerging cannabis industry — with $17 billion in sales this year — is currently troubled by a lack of racial diversity within its ranks. It is impossible to ignore the fact that members of the African American community and other racial minorities have paid a particularly high price in the war on cannabis. When the business community that follows legalization leaves behind people of color, there is cause for concern.
Recently, equity in the cannabis industry has moved to the forefront of many legalization discussions around the United States. It became the most significant issue in passage of Illinois’ recent legalization bill, and equity remains central in the discussions in New Jersey and New York. It can include many facets — from additional points on license applications for minority-owned businesses to incubator programs that help businesses get off the ground.
Yet, the single biggest advancement in equity in the near term will come from an unlikely and perhaps even unremarkable source — access to regulated financial services.
African Americans have access to far less wealth than their white counterparts. As a result, it has been difficult for black entrepreneurs to enter into the cannabis industry, which has relied on private equity to seed business opportunity. Opening banking services to the cannabis industry helps not only existing companies, but also minorities seeking access to that industry.
For example, many of the specific equity policies that states are putting in place require banking services to be meaningful. In Illinois, the state’s new landmark law to legalize and regulate cannabis establishes a fund to provide tens of millions of dollars in grants and loans to social equity applicants. Yet it remains to be seen if the financial institutions that serve the state will be willing to provide the banking services necessary to implement that portion of the law. The SAFE Banking Act would create a “safe harbor” for banks that provide small business loans, which could help level the playing field and increase opportunities for diverse representation within the cannabis industry.
Additionally, the SAFE Banking Act would establish important reporting requirements that do not exist today. It would mandate an annual report to Congress on access to financial services for minority- and women-owned cannabis businesses and recommendations to expand access for them. It would also require the Comptroller General to study barriers to marketplace entry for minority- and women-owned cannabis businesses and report to Congress on recommendations.
Members of Congress should allow banks to provide financial services to cannabis businesses. This creates access to resources for minority and women entrepreneurs and increases the chances for success in state equity initiatives. The SAFE Act is the best next step toward establishing a more equitable cannabis industry in the U.S.
Steven Hawkins, Executive Director, Marijuana Policy Project
Today, 33 states and the District of Columbia have enacted laws allowing for either medical or adult-use cannabis. An additional 14 states allow for limited medical use. But under current law, financial institutions providing banking services to legitimate and licensed cannabis businesses under state laws are subject to criminal prosecution under several federal statutes, such as "aiding and abetting" a federal crime and money laundering.
In March, Rep. Ed Perlmutter (D-CO) introduced the Secure and Fair Enforcement (SAFE) Banking Act (HR 1595) to address this discord between state and federal policy. This bipartisan legislation recently hit 200 cosponsors in the House, and a House floor vote is expected soon.
Please email your U.S. Representative to urge them to support the SAFE Banking Act! If your rep is already a cosponsor, you can thank them for their leadership on the issue.
This legislation would prevent federal regulators from punishing financial institutions for providing services to cannabis-related businesses operating in compliance with state laws. While some cannabis businesses have been able to find banking services, most banks are unwilling to work with them because they fear federal prosecution. As a result, many cannabis businesses are forced to operate entirely in cash.
Solving the banking issue would promote public health and safety, as access to banking would ensure broader patient access, help with business transparency and compliance, and reduce safety risks associated with running high-volume, cash-only businesses. In addition, the legislation would make it easier for financial institutions to provide loans to cannabis-related businesses, allowing those with the least access to capital — often minorities — to participate in the new legal cannabis industry.
Please contact your U.S. Representative in support of this bill TODAY, then share this link with friends and family who support sensible cannabis policies so they can do the same.
(This post is the first in a series providing insights into the legal marijuana industry. It is a guest post from the staff at MedMen.)
While ultimately an exciting endeavor, opening a marijuana business can be a tedious process involving a multitude of legal and monetary procedures. A close eye for detail is required. Dealing with rules and regulations and licensing applications, meeting zoning requirements, preparing concise and detailed business plans and operational protocols, attending local and state meetings, planning to manage operations once certified, and so much more are big tasks. Think: 24-hour notaries, multi-disciplined organizational issues and consensuses, leaps of faith toward the long-term investment, preparing management deals, and accountability — and it does not stop there.
Starting a successful medical and/or recreational marijuana business typically requires commitments of hundreds of thousands — and at times even millions — of investment dollars. Some states are moving in the direction of merit-based oligopolies that require substantial liquidity in order to succeed and multi-million dollar bonds to further show financial security. Marijuana has graduated to a big-business process.
Securing real estate and building a qualified team for any marijuana industry venture are two of the earliest and most fundamental aspects of obtaining a license. Locking down locations that make sense demographically while still satisfying strict locational regulations is not cheap. Landlords realize the tight supply, so favorable terms are hard to come by, meaning substantial capital is necessary. The applying team must also be comprehensive. Building a solid team, not only financially but resourcefully, is crucial in legitimizing marijuana businesses. Solid teams include healthcare to business management professionals, legal experts to accountants, horticulturalists to those experienced in law enforcement and security, and beyond. Not to mention experts to manage the marijuana-specific aspects of the operation. This range of experience is hard to come by for a mom-and-pop operation.
The complications do not end once a license is secured. Banking in the marijuana industry is currently in flux. Many banks refuse to deal with marijuana-related businesses; however, recent federal protocols have safeguarded banks willing to commit to these businesses. Still, banks are looking into the financial histories of those applying for accounts. A mom-and-pop operation is at a disadvantage to a big-business operation whose members can show ties to multi-million dollar companies operating their finances spotlessly. Accountability is crucial, and past business practices are just about the only way to show it in the emerging marijuana industry.
Ultimately, every state is going to have different marijuana laws, just as every state has different alcohol laws. Some will be more conducive (or even limit) the marketplace to bigger businesses. Others will foster an environment that ensures smaller businesses can compete. There could even be some where marijuana sales are limited to state-run stores.
States are going to experiment, learn from their experiences, and learn from each other, just as we have seen take place with alcohol in the 80 years following the end of prohibition. In any case, it will be fascinating to watch it unfold.