The states aren’t waiting for us… This is an $11 billion industry and growing. And it’s growing because the people and the states are demanding it. We need to step up.
Rep. Earl Blumenauer (D-OR)
Last week the 116th Congress voted to pass bill H.R. 1595, called the Secure and Fair Enforcement Banking Act (SAFE) of 2019. This historic bill was the first piece of stand-alone cannabis legislation ever put before Congress– and it passed in a landslide of 321 to 103 votes.
The session was called under a special procedure called “Suspension of House Rules,” which requires a 2⁄3 majority vote (or 290 of 435 votes) and is typically used for “non-controversial” legislation.
Let’s take a closer look at why this bill is important, and how it would affect those of us in the industry.
In effect, SAFE would impact the entire supply-chain of the cannabis industry, legitimizing it by treating cannabusiness just like any other legal enterprise.
Essentially, the SAFE Act would extend protections to financial institutions offering basic banking and insurance services to “cannabis-related legitimate businesses,” meaning both “hands-on” cannabis and ancillary cannabis businesses operating within in legal states, as well as industrial hemp businesses in every state. That means a few key things:
Safety and security. Cash-only dealings have created enormous security concerns for employees of cannabis businesses. The need for on-site ATMs and cash transport puts businesses and their employees at constant risk of theft, armed robbery and violent crime. These issues are compounded by the lack of access to insurance. Passage of the SAFE Act would offer protection on both fronts: dispensaries, grow operations, breeders, extractors, and processors would no longer be forced to operate on a cash-only basis, and these businesses would have access to insurance services– in case the worst should still happen.
Operations and efficiency. Mountains of cash, ironically, also means huge added costs and cumbersome security policies. Increased labor dedicated to cash money processing (handling, counting), armed transport, security, surveillance systems, create an enormous “expansionary constraint” that prevents small businesses from growing, profiting, or providing benefits and wage increases for their employees.
No more “grey” market. That means we get protected banking services, too. And so do the contractors that come into a dispensary to make repairs, the programmers developing software for operations, the lawyers, the manufacturers that create packaging materials, the engineers, the artists, and everyone else involved in supporting the cannabis industry. The bill would effectively eliminate these business’ “grey-market” income subject to Suspicious Activity Reports (SARs)– and relieve headaches at tax season.
No more confusion over the status of CBD. The SAFE Act, as written, confirms the legality of hemp and hemp-derived products (like CBD and other cannabinoids), as well as the legality of offering financial services to hemp businesses. Bank regulators would effectively be compelled to distinguish between hemp (containing less than 0.3% THC and federally legal) and cannabis (containing more than 0.3% THC and federally illegal), which, despite the passage of the 2018 Farm Bill, they still have not. That’s why many CBD companies are still struggling to access payment processing services, almost a year after hemp was removed from the Controlled Substances Act.
This act, provided that it passes in the Senate, would technically do nothing to change the Schedule I status of cannabis. It would, however, represent a monumental first step towards descheduling in the near future.
Even so, descheduling isn’t the end-all. Almost one year after the descheduling of industrial hemp, CBD and hemp businesses (even non-profits) are still struggling to access financial services because of “liability concerns.” In May 2019, six months after hemp was removed from the Controlled Substances Act, Elavon (a subsidiary of US Bank) terminated all accounts with CBD companies.
Payment processors like Square have only recently begun to roll out pilot payment processing programs for hemp businesses, but they’re doing it with extreme caution: it’s invite-only, and limited to a select few businesses.
Now we wait as the bill moves onto the Republican-dominated Senate, where Majority Leader Mitch McConnell (R-KY) presides. The language of the Senate version of the bill may be “sweetened up” to include key hemp provisions that would secure access to payment processing services for Industrial hemp businesses– and make the bill more palatable for the GOP.