This past September, the U.S. House of Representatives passed H.R. 1595: Secure And Fair Enforcement Banking Act of 2019 (referred to as the SAFE Banking Act.) The bill, introduced by Colorado Rep. Ed Perlmutter, aims to legalize relationships between banks and legitimate cannabis-related businesses by providing financial institutions with legal protections.
While the SAFE Banking Act has passed the House, it has yet to be passed by the Senate and signed into law by the President. Medical marijuana businesses and dispensaries throughout the United States have eagerly awaited regulations that would make it easier to access the banking services they desperately need.
Despite medical and recreational marijuana being legal in several states, cannabis is still illegal on the federal level. Because of this, and the fact that there are currently no laws that allow banks to do business with cannabusinesses, banks fear that opening accounts for legitimate marijuana businesses might count as money laundering. Banks and similar entities, such as credit unions and credit card companies, that work with marijuana-related businesses are at risk of losing their charter and being forced to shut down.
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Currently, legitimate cannabusinesses do not have access to traditional banking, which stops them from accepting credit cards, making deposits and writing checks for employee payroll. Applying for bank loans to start or expand a marijuana-based business often end in the loan being denied. This has led many medical marijuana businesses to adopt cryptocurrencies, such as HempCoin and CannabisCoin, as an alternative banking solution.
The SAFE Banking Act, if signed into law, promises banks and other financial institutions the protections needed to offer banking and loans to marijuana businesses in states where these businesses can operate legally. Florida dispensaries and other cannabis-related businesses would finally be able to apply for loans, accept credit cards as a form of payment, and have a payroll, just like any other business in the state.
Ready to start a Florida dispensary? Talk to our Marijuana Law Division attorneys at The Aguilera Law Center.
What does the SAFE Banking Act do?
According to the official bill summary, written by the Congressional Research Service, the bill “prohibits a federal banking regulator from penalizing a depository institution for providing banking services to a legitimate marijuana-related business”. This means that if the bill is signed into law, federal regulators will no longer be able to impose penalties on banks or other financial institutions for engaging with legal cannabusinesses.
More specifically, the bill stops federal banking regulators from doing the following:
- Ending or changing the terms of a bank or financial institution’s deposit or share insurance just because they service cannabis-based businesses.
- Prohibiting or actively discouraging banks from offering their services to cannabusinesses.
- Creating incentives for banks that do not offer their services to an account holder just because of their affiliation with a cannabis business.
- Penalizing or changing the terms of a loan made to an account holder due to their ownership of or involvement with a cannabis-related business.
Although none of these penalties have been imposed on any bank or financial institution, the Federal Reserve has previously threatened to take action and impose consequences on banks servicing the industry.
How will the SAFE Banking Act change the cannabis industry?
With the passing of the SAFE Banking Act, many changes are sure to come. For one, cannabusiness owners and those who do business with them will be able to open bank accounts and apply for loans without fear of having accounts closed or rejected. Employees and vendors will finally be able to receive payment by check or direct deposit, as opposed to being paid in cash or by money order. Business owners will also be able to better keep track of the cash flow within their company and pay Federal taxes without issue.
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The passing of the act will also create changes on a national level. Banks and other financial institutions will finally be able to engage with the cannabis industry, allowing for the investment in and growth of the industry. Both state and national economies also stand to benefit, as the industry is projected to grow significantly in the coming years. According to New Frontier Data, the legal cannabis industry is expected to grow to $16.6 billion industry by 2025. The growth of the industry will create new jobs, expand markets, and create greater tax revenue federally.
What happens next?
Although the bill passed in the House of Representatives, it still has to pass in the Senate and be signed into law by the President. Given the opposition to the legalization of marijuana by senators such as Kentucky Senator Mitch McConnell, the passing of the bill by the Senate is unlikely. However, if it does manage to pass the Senate, it must still be signed into law by the President, who may likely veto the bill.
Looking to start a business in the Florida cannabis industry? Get in touch with The Marijuana Law Division at The Aguilera Law Center and get started the right way. Call (305) 255-FIRM.