Tax and Regulate

How the SAFE Banking Act Means Equity

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

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