A key United States Senate panel will be meeting on July 23, 2019, to consider steps that would make banking services accessible to cannabis companies. The hearing could make way for crucial cannabis banking reform.
The Senate Banking Committee hearing includes Senator Jeff Merkley and Senator Cory Gardner. Merkley is a Democrat from Oregon while Gardner is a Republican from Colorado.
Both of them support the Secure and Fair Enforcement (SAFE) Banking Act, which would allow banks and financial institutions to serve cannabis businesses in states where the drug has been legalized without fearing prosecution by the federal government.
More than three months ago, the congressional panel advanced the SAFE Banking Act to the full House. The House Financial Services Committee approved the bill with a strong bipartisan vote.
Why is the bill necessary?
Due to the illegal federal status of cannabis, major banks in the country — like Bank of America, Wells Fargo, and Chase — refuse to provide financial services to cannabis companies, even if these companies are legitimate and licensed by the state they are in. These national banks are afraid of running into trouble with federal authorities.
As a result, state-legal pot companies are forced to do their business on a cash-only basis. This means that they can only accept cash from customers and refuse debit and credit cards. They also pay their employees and suppliers in cash.
Additionally, businesses also cannot avail of financing programs, bank loans, and credit lines. These things were supposed to be a small enterprise’s financial lifeblood.
Sure, there are cannabis retailers that were able to open basic financial service accounts with small credit unions and local banks. However, the services these small institutions provide are very limited.
The bill was created after a number of lawmakers acknowledged that the fact that cannabis companies are operating exclusively in cash puts these businesses at risk. For one, state-legal cannabis businesses can be a quick and easy target for theft.
The SAFE Banking Act was greatly supported by both Democrat and Republican lawmakers. It is also supported by the banking industry, with financial firms being eager to gain an assurance by the federal government that they can do business with legal marijuana companies without facing sanctions.
Lawmakers who do not support the bill have pointed out that cannabis businesses are still technically illegal, so if they want to permit banks to engage in business with these companies, perhaps legalizing cannabis should be first on the agenda.
The announcement of a hearing was unexpected.
That is because in May, Sen. Mike Crapo, the Idaho Republican who chairs the Senate Banking Committee, indicated that he might refuse to give the bill a hearing.
The SAFE Act has 206 co-sponsors in the House and 31 in the Senate.