I’m fairly certain that extra ink has been spilled on the Safe and Truthful Enforcement Act (“SAFE Banking”), than every other proposed hashish regulation. It simply gained’t move and it simply gained’t die. Particularly, SAFE Banking was launched in 2017 and it handed the Home seven occasions (seven occasions!) with bipartisan help since 2019. The general public likes it too: right here’s a November 2022 Knowledge for Progress ballot revealing that “By a +65-point margin, voters help making certain that banks don’t discriminate towards official marijuana-related companies.” This invoice ought to move, proper?
It’s getting nearer. SAFE Banking will lastly go to mark-up this week within the Senate Banking Committee. That Committee is making ready to vote earlier than October 1, though what they’ll be voting on at this level isn’t solely clear. (For some chatter on that, take a look at this Marijuana Second piece from final Friday.) However let’s assume that SAFE Banking, after mark-up, holds onto its key tenets. It will stop federal banking regulators from:
- prohibiting, penalizing or discouraging a financial institution from offering monetary providers to a official state-sanctioned and controlled hashish enterprise, or an related enterprise (akin to a lawyer or landlord offering providers to a authorized hashish enterprise);
- terminating or limiting a financial institution’s federal deposit insurance coverage primarily as a result of the financial institution is offering providers to a state-sanctioned hashish enterprise or related enterprise;
- recommending or incentivizing a financial institution to halt or downgrade offering any sort of banking providers to those companies; and
- taking any motion on a mortgage to an proprietor or operator of a cannabis-related enterprise.
Would any of that be actually useful? In a vacuum, sure. However we don’t stay in a vacuum, and if one thing like this passes you may anticipate a bunch of collateral points. Most worrisome to me is that SAFE Banking may finally enhance AML/BSA compliance burdens for monetary establishments with hashish clients. A whole bunch of them already supply providers to state-licensed marijuana companies: these banks are properly versed within the old-as-dirt 2014 FINCEN steerage on working with business. If SAFE Banking passes, we’ll absolutely get extra guidelines and steerage from the Treasury Division and elsewhere. Watch out what you want for.
This challenge was highlighted in a well-written American Banker piece revealed yesterday (it’s paywalled, however they’ll commerce you a freebie for an electronic mail). In that article, I and others additionally opined that SAFE Banking isn’t as vital as when the regulation was first launched in 2017. It’s because SAFE Banking wouldn’t truly clear up numerous hashish banking points, past entry to banking providers (which is already form of solved). Particularly, it wouldn’t:
- grant entry to SBA applications (there’s one other invoice floating round for that)
- enhance lending choices in any direct or discernible sense;
- grant U.S. hashish firms entry to public capital markets (sorely wanted);
- require Visa, Mastercard, and so forth. to work with the hashish business (tremendous sorely wanted); or
- remove IRC § 280E (though this may increasingly happen via rescheduling).
Do I nonetheless hope SAFE Banking passes? I believe so. The satan is within the particulars with one thing like this. And, as I informed American Banker:
Proper now, most states solely have small credit score unions working with the business, and most of those credit score unions solely supply fundamental service provider accounts with comparatively excessive charges. A couple of have extra expansive choices, like tools loans, however usually hashish firms don’t have entry to the total suite of providers that different, equally sized commodities companies have they usually pay extra for these restricted providers.
In that article, I additionally talked about that I’ve discovered to not get my hopes up with SAFE Banking. Even when this invoice will get out of Committee, it might want a flooring vote, after which reconciliation with regardless of the Home is considering on the subject. That seems like miles and miles away, particularly right this moment when Congress is struggling to maintain the lights on.
I don’t imply to be discouraging. In reality, it’s simpler to really feel OK whenever you consider SAFE Banking as not the most important deal. Today, it’s actually not.