The U.S. House of Representatives passed a bill that would give state-authorized marijuana companies easier access to banking services.
The bill, Called the SAFE Banking Act, HR 1996 would prohibit federal bank regulators from penalizing banks and other custodians for providing banking services to cannabis companies. It passed on Monday evening with a vote of 321 to 101 bipartisans.
In total, it has 36 states and four territories has authorized the use of marijuana for medical purposes and 17 states have authorized recreational use. However, the drug is still considered a prohibited substance under the federal Controlled Substances Act, and banks that provide services to cannabis companies can be sanctioned under federal money laundering laws.
The legislation passed by the House in 2019 with bipartisan support, but was ignored by the Republican-controlled Senate. Democrats are optimistic about the measure’s chances now that their party controls the chamber, although Republicans can still block most legislation.
Senators Jeff Merkley, a Democrat from Oregon, and Steve Daines, a Republican from Montana, introduced the Senate bill. It currently has 32 co-sponsors, including six Republicans, but the measure will need even more support to pass the 60-vote threshold needed to advance in the chamber.
Senate leader Chuck Schumer has said he wants to work to lift the federal ban on cannabis. He is currently drafting legislation with Senate Speaker Ron Wyden of Oregon and Senator Cory Booker of New Jersey proposing to remove marijuana from the controlled substance list and regulate it at the federal level.
The SAFE Banking Act falls far short of what many cannabis companies in the US would like to see: a full federal green light, or at least decriminalization, for marijuana.
But it could solve some of their most pressing financial problems by enabling them to have bank accounts with traditional banks. So far, the inability to do so has created a number of burdens and risks for the industry, from having to store mountains of cash with small credit unions to facing additional security concerns when making all-cash payments and creating their own debit card system. receive payments from consumers.
This version of the law lacks language to address two other major financial problems facing the cannabis industry. It wants more clarity on whether institutional investors can put money into marijuana companies without fear of legal ramifications. So far, such concerns mean that individual investors and family offices are the main investors in the industry, and many US investors have put their money into Canadian marijuana companies because of the federal legality in that country.
The other regulatory burden the cannabis industry wants to take away from it is 280E, the tax law that says companies that are allowed to trade in federally illicit substances cannot get a deduction in the same way as other US companies. Many cannabis companies have said that if 280E was discontinued, they would immediately be much more profitable.
Even without explicit language in the SAFE Act, there are some hope that financial institutions could see other changes that make them more comfortable investing in cannabis. The Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, which analyzes financial transactions to combat money laundering, may update its guidelines to resolve conflicts with the new SAFE law, Jefferies analyst Owen Bennett said in a statement. March research note. If the agency’s language applies not only to banks that take deposits, but to all financial institutions, it could open up more institutional investment.