Happy 4/20: Congress Passes Marijuana Banking Reform, But Cannabis Is Still Cash Only—For Now

In a bipartisan vote, the US House of Representatives on Monday approved reform of federal banking rules that would finally allow legal marijuana businesses to access banks.

Now, ending a dangerous and unwieldy cash-only cannabis industry—and encouraging investment that would diversify and make more equal what’s to date been an industry dominated mostly by white men and wealthy capitalists—heads yet again to the US Senate, which is where most cannabis reform bills have gone to die.

Activists from the DC Marijuana Justice (DCJM) wave flags during a rally to demand Congress to pass … [+] cannabis reform legislation on the East Lawn of the US Capitol in Washington, DC on October 8, 2019 (Photo by Olivier Douliery / AFP) (Photo by OLIVIER DOULIERY/AFP via Getty Images)

AFP via Getty Images

For the fourth time, the House voted to approve what’s known as the Secure and Fair Enforcement Banking Act, or SAFE Act.

Monday’s vote was 321 to 101, and included support from a majority of Republicans.

Though cannabis is legal at some level in 47 states—and adult-use cannabis is a booming billion-dollar industry in more than a dozen, with markets in four more states, including New York and New Jersey, soon to open—nearly every major bank and credit unions refuses to accept business from legal cannabis companies, for fear of federal prosecution or penalty.

This excuse strikes some observers as dishonest—banks for years did banner business with very illegal drug cartels, after all—and there are some banks who quietly accept cannabis customers.

However, the practical effect has been a legal industry, worth billions of dollars, forced to conduct basic transactions all in hard cash, including paying state and federal taxes, an arrangement that critics say is unfair and unsafe.

The SAFE Act clarifies that transactions involving “legitimate cannabis-related businesses” are not subject to anti-money laundering laws and that banks won’t run afoul of asset forfeiture proceedings for handling legal cannabis business’s accounts.

Sponsors say banking reform will make running marijuana businesses easier and safer. But we’ve been here before.

Banking reform was approved in the House already: once as a stand-alone bill, and two more times as part of COVID-19 relief packages.

Now the action moves to the US Senate, where, despite the promise of Majority Leader Chuck Schumer (D-NY) that cannabis legalization will happen—and soon—cannabis banking still faces an uphill climb.

It seems highly likely that the Senate version of the SAFE Banking Act will at least get a hearing, which is more than the bill could expect when Sen. Mitch McConnell was Majority Leader.

The chairman of the Senate Banking Committee is Sen. Sherrod Brown, an Ohio Democrat whose state has a medical-marijuana industry. And the ranking member, Sen. Patrick Toomey, is a Republican from Pennsylvania—which is poised to be one of the next states to legalize adult-use cannabis.

The Senate version is sponsored by Sen. Jeff Merkley (D-OR). Merkley has 32 cosponsors, including seven Republicans. But owing to the Senate’s arcane rules, sixty votes are required to pass meaningful legislation absent parliamentary maneuvering.

And so, even though allowing cannabis firms to pay taxes to the federal government that outlaws them is considered the most conservative marijuana policy reform Congress could pursue, it’s by no means guaranteed.

Still, cannabis reform advocates and industry lobbyists have something meaningful to celebrate.

“From the lack of startup capital for the exhaustive application process to managing the extraordinary operational costs, minority business owners often face the painful decision to give up or sell their interests to predatory investors who use management agreements that deprive minority operators of meaningful rights of ownership,” said Amber Littlejohn, executive director of the Minority Cannabis Business Association.

SAFE Banking could fix that—if the Senate abides.