The cannabis sector in the United States is enthusiastically celebrating the Senate Committee's green light for the SAFER Banking Act, a bill whose approval would be a major boost to the sector's growth.
The new bill could be a game-changer for the US cannabis sector. The current federal legal framework in the United States does not allow cannabis businesses to access basic banking services, which raises their risks and limits their growth. The bill, known as the Secure and Fair Enforcement Regulation (SAFER) Banking Act, would allow these businesses to operate on a level playing field with other industries, making it easier for them to grow and recognising the legitimacy and economic contribution of the sector.
After earlier versions were approved by the House of Representatives and the Senate Committee gave its green light in September 2023, the SAFER Act was expected to be approved by the Senate.
Background
In recent years, 23 states and Washington, D.C. have legalised the recreational use of cannabis by adults, and 38 states have introduced medical cannabis programmes.
Although cannabis is legal in many states, federal regulation has been an obstacle, restricting the industry's access to the basic financial tools it needs for its growth and security.
Under the restrictions of current federal rules, businesses in the cannabis sector cannot access financial tools such as bank accounts and deposits, or basic necessities such as point-of-sale (POS) terminals to accept credit card payments. Because of these restrictions, businesses have to run their operations in cash only, which increases the security risks for owners, employees and customers, along with the complications that can follow.
Earlier versions of this proposal have already been approved by the House of Representatives as many as seven times. However, it had never made progress in the Senate.
US Senate moves forward with the SAFER Act: cannabis banking on the horizon
On 27 September 2023, the Senate committee gave the bill the green light to continue its legislative process, but it still has to be approved by the full Senate.
Details of the bill
The SAFER Banking Act seeks to remove banking barriers for cannabis businesses by giving them a clear legal framework.
At its core, the bill seeks to provide security for these businesses, recognising the legitimacy and economic contribution of the sector and making it easier for them to access banking services.
The bill is the result of months of negotiations and has been introduced jointly by Republican, Democratic and independent senators: Jeff Merkley (D-Ore.), Steve Daines (R-Mont.), Kyrsten Sinema (I-Ariz.), Cynthia Lummis (R-Wyo.) and Majority Leader Chuck Schumer (D-N.Y.).
The SAFER Banking Act will provide a safe harbour for state-legal cannabis dispensaries and growers to access federally regulated banks and credit unions, which until now have been reluctant to work with these businesses because of the ongoing federal prohibition.
Among the most notable changes, the bill will allow these businesses to access regulated banking services, setting uniform guidelines, and to protect their financial rights. The law will prohibit closing the bank accounts of cannabis businesses “without good cause”, and will protect the employees of these businesses when they apply for mortgages backed by federal programmes. The proposal also “suggests” that banks should not deny their financial services to cannabis businesses on the grounds of personal beliefs or political motives, and urges the “U.S. Treasury's Financial Crimes Enforcement Network” to update its guidance on banking services for the cannabis industry within six months.
Another important point is that, this time, the bill comes three weeks after the Biden administration recommended rescheduling cannabis under federal drug laws. In 2023 the DEA (“Drug Enforcement Administration”) was expected to move cannabis from Schedule I (substances with no accepted medical use and a high potential for abuse) to Schedule III, which would mean a shift in the legal and medical perception of cannabis and would pave the way for the new law to be passed.
Moving cannabis to Schedule III recognises the medical use of cannabis and its lower potential for abuse compared with Schedule I and II substances. This change would make medical research on cannabis easier, as well as the regulation of cannabis-related activities across the country in general, including the current SAFER Banking Act.
The SAFER Act points to a financial revolution in the cannabis sector
The proposal is seen with enthusiasm and as a necessary response to a problem that has limited the industry's potential for growth and expansion. The SAFER Banking Act has the potential to transform the cannabis industry, offering financial security and promoting its growth in the US. If it is approved by the full Senate, this bill will give the cannabis-related economy an even bigger boost across the country.
