A Ray of Sunshine for Legal Weed Businesses? New U.S. House Legislation Would Allow for New Financial Services for Cannabis Companies

A new amendment passed by the U.S. House of Representatives will allow banks to do business with legitimate state cannabis companies without being penalized by federal regulation.

At the end of September, the U.S. House of Representatives passed a cannabis banking amendment as part of this year’s defense budget bill that will allow federally-backed banks to do business with legitimate state cannabis companies without being penalized by federal regulation. 

Each year, the National Defense Authorization Act (NDAA) is passed. For the fiscal year of 2022, the NDAA must still be passed by the House, but thanks to the Secure and Fair Enforcement Banking Act (SAFE), cannabis banking reform seems more realistic now than it ever has before. 

The Issue

Our current federal laws prohibit banks and other financial institutions from servicing legitimate cannabis-related businesses because marijuana is still considered to be a Schedule I drug. Unfortunately, this has created challenges in states like California, Colorado, and Washington where recreational cannabis is legal, forcing startups and entrepreneurs to begin their journey with an uphill battle due to cannabis companies’ sole reliance on cash or cryptocurrency to cover expenses. 

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This brings us to the importance of why the SAFE Banking Act can help provide a ray of sunshine for the legal cannabis industry. Currently, the legislation would allow banks to offer credit cards, checking accounts, and other financial services to legal marijuana businesses, which previously banks have been prohibited from doing under the current provisions of the Secure and Fair Enforcement Banking Act, or SAFE.  

Back in April, the House passed cannabis banking reform by a strong bipartisan vote of 321 to 101, but the Senate has been quiet on the issue. The legislation, first passed in September 2019 on a bipartisan vote, marked the first time either chamber of Commerce had approved a pro-marijuana measure. 

The SAFE Banking Act “will strengthen the security of our financial system and keep bad actors like cartels out,” said Rep. Ed Perlmutter, a democrat from Colorado, in a tweet, who has been a major driver behind the cannabis legislation. Specifically, SAFE would enable banks and other financial institutions to work with legitimate cannabis businesses without fear of federal reprimand.

Seventeen states, including New Jersey, have legalized cannabis for both medical and recreational use. However, legal marijuana businesses have still had an uphill battle federally, when it comes to conducting their business largely in cash, as federally regulated banks are required to abide by federal law currently banning marijuana if they provide financial services. 

Last year, over $17 billion in legal cannabis was sold in the U.S. primarily through cash transactions, which has encouraged lawmakers to urge Congress to adopt cannabis banking measures to better provide for a well-regulated cannabis industry.

Legitimate cannabis businesses have struggled to survive, as they have been forced into a financially anachronistic infrastructure that only allows for legal marijuana dispensaries to transact with consumers in cash. 

For proponents of passing SAFE, including Senate Majority Leader Chuck Schumer, a democrat from New York, arguments for broader cannabis reform could result in industry impact, as it is the intention of lawmakers to get as broad a support system as possible for this type of legislation. 

Additional concerns include the dangers of cannabis companies dealing only in cash, which may subject these businesses and their employees to possible criminal incidents of robbery, assault, burglary, and more. 

Bottom Line

As of the beginning of October, the House Judiciary Committee approved a bill to decriminalize and deschedule marijuana. The bill would also implement a federal tax on marijuana projects, which would help to fund grants for communities impacted the most by the nation’s ongoing war on drugs. 

What lawmakers don’t know is whether President Biden will sign the bill, despite his previous endorsement of decriminalizing marijuana. While approximately 321,000 Americans now work in the legal cannabis industry, it’s possible that bipartisan backing may not be enough to withstand the traditional scrutiny that arguably puts the cannabis industry in danger. 

Andrew Rossow is a Legal Contributor at Lawrina. He is a practicing attorney, adjunct law professor, writer, and speaker on cybersecurity, digital monies, and privacy. Utilizing his millennial upbringing, Rossow provides a well-rounded perspective on legal and technology implications Bitcoin brings to the world of consumer finance. HIs work has been featured on Bloomberg News, Cheddar, CoinTelegraph, Law360, and numerous others. You can follow him on Twitter at @RossowEsq or visit his website AR Media Consulting.

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