The Problem of Cash-Only Cannabis Businesses
Cannabis is a booming industry in the United States, with more than half of the states legalizing it for medical or recreational use. However, cannabis businesses face a major challenge when it comes to banking and financial services. Because cannabis is still considered an illegal substance under federal law, most big banks are reluctant to provide services to dispensaries and related businesses, fearing civil or criminal liability. This leaves many cannabis businesses operating on a cash-only basis, which poses significant risks and inconveniences for them and their customers.
Some of the problems that cash-only cannabis businesses face are:
- Difficulty in accessing loans, credit, and capital to start or expand their operations
- Higher costs of security, transportation, and storage of large amounts of cash
- Increased vulnerability to theft, robbery, and violence
- Limited ability to track and report transactions, taxes, and revenues
- Inability to accept credit or debit cards from customers, who may prefer cashless payments
- Lack of financial inclusion and empowerment for small, minority-owned, and women-owned businesses
The Solution of the SAFER Banking Act
To address these issues, Maryland Attorney General Anthony Brown is leading a coalition of 22 Attorneys General from different states and territories, along with Washington D.C. Attorney General Brian L. Schwalb and Oklahoma Attorney General Gentner Drummond, in urging Congress to pass the Secure and Fair Enforcement (SAFER) Banking Act of 2023. The SAFER Banking Act would create a safe harbor for banks and financial institutions that provide services to state-licensed cannabis businesses, protecting them from federal prosecution or penalties. The Act would also prohibit federal regulators from discouraging or penalizing banks that serve the cannabis industry.
The Attorneys General argue that the SAFER Banking Act would benefit not only the cannabis businesses, but also the public safety, the economy, and the state oversight. Some of the benefits that the Act would bring are:
- Increased access to funding and financial services for cannabis businesses, especially for small, minority-owned, and women-owned businesses
- Reduced risk of crime and violence associated with cash-based transactions
- Enhanced transparency and accountability of the cannabis industry
- Improved collection and enforcement of taxes and fees
- More opportunities for job creation and economic growth
The Support and Opposition of the SAFER Banking Act
The SAFER Banking Act has received bipartisan support from lawmakers, as well as from various stakeholders in the banking, business, and cannabis sectors. The Act has passed the House of Representatives twice in 2019 and 2021, but has faced obstacles in the Senate. Some of the supporters of the Act include:
- The American Bankers Association
- The Credit Union National Association
- The National Association of State Treasurers
- The National Cannabis Industry Association
- The National Conference of State Legislatures
However, the SAFER Banking Act also faces opposition from some groups that are opposed to cannabis legalization in general, or that prefer a more comprehensive reform of federal cannabis policy. Some of the opponents of the Act include:
- The Drug Enforcement Administration
- The Smart Approaches to Marijuana
- The Marijuana Justice Coalition
The fate of the SAFER Banking Act remains uncertain in the Senate, where it needs 60 votes to overcome a filibuster. However, the Attorneys General hope that their letter will persuade the congressional leaders to advance the legislation as soon as possible.
