On May 19th, a coalition of thirty-four state attorneys general led by Colorado AG Phil Weiser urged Congress to pass the Secure and Fair Enforcement (“SAFE”) Banking Act as part of upcoming COVID-19 relief legislation. The bipartisan group includes attorneys general, such as Ohio AG Dave Yost, who have previously opposed economic relief for the cannabis industry. First introduced in 2019 by Representative Ed Perlmutter (D-CO), the SAFE Banking Act is currently awaiting consideration by the Senate after passage by the House of Representatives.
Since marijuana remains a federally illegal Schedule 1 drug under the Controlled Substances Act, businesses in the industry have been ineligible to receive loans or other financial aid under the recently passed Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. Additionally, those in the space remain unable to utilize FDIC-insured banks in the course of their banking operations. The SAFE Banking Act seeks to address both these issues by creating a safe harbor allowing cannabis companies operating in compliance with state regimes access to the federal banking system.
Stating that “the current predicament of a rapidly expanding national marketplace without access to the national banking systems has resulted in an untenable situation,” the attorneys’ general letter outlines three key ways in which the COVID-19 pandemic has highlighted a need for relief in the cannabis industry. First, the predominantly cash-based nature of the industry has left many businesses vulnerable as prime targets for criminal activity. Second, reliance on hand-to-hand cash transactions magnifies the health and public safety concerns associated with COVID-19. Finally, the letter notes that passage of the SAFE Banking Act would allow the government to collect tax revenue from the marijuana industry—estimated to have generated $15 billion in sales in 2019—providing much-needed relief for state and local governments anticipating budget shortfalls as a result of the pandemic.
Although it has received broad bipartisan support in the House, many believe the SAFE Banking Act faces an uphill battle in the Republican-controlled Senate where members have yet to consider the bill. We will continue to monitor progress of the Act.
* Aaron Parry contributed to this post.