Late last evening, the U.S. House of Representatives passed SAFE Banking legislation by voice vote, offered as an amendment to the National Defense Authorization Act (NDAA/H.R. 4350). While SAFE Banking legislation previously passed in the House, it had stalled in the Senate due to Republicans’ demands for changes that would have transformed the bill from one offering protection to financial institutions in the cannabis industry, to one enacting additional guardrails on federal marijuana policy. SAFE Banking legislation’s inclusion in a must-pass bill this time around marks a critical step in the effort to enact this legislation this Congress.
What is SAFE Banking legislation?
The SAFE Banking amendment would enable financial institutions to support the cannabis industry by eliminating two major risks of adverse government action. The proposed law explicitly permits financial institutions to do business with cannabis companies and prohibits the government from terminating or limiting a financial institution’s deposit or share insurance solely because the institution works with a cannabis business. These changes would remove current federal restrictions that have resulted in only a limited number of financial institutions currently willing to take on the risk of banking cannabis companies. And those that do charge exorbitant fees and costs that foreclose the services to many—predominately impacting small and diversity-owned entities. As a result, the economic development of all cannabis industries, and especially small and diversity-owned entities, has been impeded through reduced liquidity, heightened entry barriers, and heightened security issues for some businesses forced to depend upon cash transactions.
Legislative next steps
The House is still debating the overall NDAA, and passage is expected later today. Next, the bill will go to the Senate, which is drafting its own version of the legislation. Perhaps the biggest hurdle to passage is germaneness (i.e., relevance of the amendment to national defense issues), an issue addressed prior to the voice vote by arguing that limited banking encourages cash-only transactions, which are a major security concern to the cannabis industry. Citizen and industry engagement will be crucial to ensure that the SAFE Banking language remains in the final version of the NDAA.