As the cannabis industry continues to grow and become legal in more states, it remains illegal at the federal level. That means the businesses involved in it primarily do business in cash, with out access to the financial system. This puts cannabis businesses in precarious situations.
The Secure and Fair Enforcement Banking Act (SAFE Act), a bill passed in the House in late September, would allow for banks and financial institutions to work with cannabis businesses and eliminate extensive costs and safety concerns that come with running a cash-only operation.
The SAFE Act would provide “a safe harbor for banks and lenders to work with state-legal cannabis businesses to address public safety, transparency, and access to capital,” according to the National Cannabis Industry Association (NCIA).
Onward, to the Senate! https://t.co/4eScqFdcMF
— TheCannabisIndustry (@NCIAorg) October 22, 2019
It was the first time in history that a “standalone cannabis bill” has made it to the House and it passed with a bipartisan majority. (RELATED: Jay Z Enters Wildly Growing Cannabis Industry As Brand Strategist)
The cannabis industry is a rapidly growing, billion dollar industry in America. New Frontier Data predicts in a 2018 study that the legal Cannabis industry in the United Stated will grow to $25 billion by 2025, with a compound growth rate of 14.7 percent.
The current bill in the Senate was introduced by Republican Sen. Cory Gardner of Colorado and Democratic Sen. Jeff Merkley of Oregon. Republican Sen. Mike Crapo of Idaho, the Chairman of the Senate Banking Committee, is currently debating with others if there should be separate legislation for this or if they should amend current cannabis legislation.
Morgan Fox, Media Director at the NCIA, told the Daily Caller that the NCIA is “confident that some form of cannabis banking reform is going to move through the senate floor this year.”
The NCIA explains that financial institutions are hesitant to get involved with cannabis and ancillary businesses because of the possibility of prosecution or punishment. Several banking institutions have lobbied for the SAFE Banking legislation, according to Fox.
Recreational marijuana is legal in 33 states, but at the federal level, recreational marijuana is classified as a schedule 1 substance, putting it in the same category as heroin, LSD and ecstasy.
Fox noted that this bill would prevent prosecution or punishment that banks might have endured if they participated in this business. While there are no current prosecutions for this crime, Fox said, “Mid-level and larger banks actually need a legislation in place,” for them to get involved. (RELATED: Is Cannabis The Cash Crop Of The Future?)
The SAFE Act will also open up the cannabis industry’s lack of access to banking. The industry is primarily cash run, which creates several public safety concerns, and if banks do allow cannabis businesses to open accounts, the rate per month is enormous.
Fox notes that sometimes banks cancel personal accounts for even being an employee within the cannabis field, which causes several personal banking issues for employees in the cannabis industry.
The process by which this cash business runs is also very expensive because it involves a lot of extra security when transporting cash or product.
Running a cash business also poses problems for state tax offices, CNBC reports. Some offices had to hire extra security to ensure safety.
Harmony Dispensary in Secaucus, New Jersey, for example, has not been able to keep a bank account. They approached six institutions and three agreed to work with them, but eventually they were dumped by all three, according to CNBC. The company received no warning from the banks, thus being unable to pay their staff, suppliers or bills.
Harmony Dispensary did not respond to the Daily Caller’s request for comment.
However, in addition to dispensaries and cultivators, ancillary businesses like “cleaning services, landlords, and consultants” are similarly affected.
Steve Hawkins, the director of the Marijuana Policy Project (MPP), told CNBC that they knew an organization that only a received thirty-days notice when their bank decided to drop them.
The MPP continues to support the SAFE Banking Act, “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,” MPP said in a press release.
The SAFE Banking Act would make it so “the cannabis businesses will not have to worry about the financial burden,” Fox told the Caller when asked about how the bill would benefit businesses.
If this bill does not pass in the Senate, alternative solutions are going to continue to pop up. For example, dispensaries now have cashless ATMs in which customers can use their debit cards and receive a voucher that would be turned in, instead of cash to purchase the product, according to CNBC.
The bill faces a Republican-controlled Senate and Sen. Majority Leader Mitch McConnell. According to Fox, “Mitch McConnell has not really been friendly through this issue but he is a big fan of hemp,” so they are feeling some surge of confidence the bill will pass once its determined whether or not it will be presented as separate legislation or as an amendment to other legislation.