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Senate Banking Committee to Vote on Cannabis Banking Bill

The Senate Banking Committee is set to vote on a bill that would provide legal clarity and protection for credit unions and other financial institutions that serve cannabis-related businesses in states where marijuana is legal. The bill, known as the Secure and Fair Enforcement Regulation (SAFER) Banking Act, has been revised to address some concerns raised by lawmakers and regulators.

What is the SAFER Banking Act?

The SAFER Banking Act is a bipartisan legislation that aims to create a safe harbor for depository institutions that wish to provide financial services to state-sanctioned marijuana businesses or service providers. The bill would prevent federal banking regulators from taking punitive actions against such institutions, such as terminating their deposit insurance, restricting their access to the Federal Reserve System, or imposing additional capital requirements.

The bill would also protect ancillary businesses that provide goods or services to the cannabis industry, such as landlords, lawyers, accountants, and consultants, from being penalized by federal regulators for their association with marijuana-related businesses. Additionally, the bill would facilitate the access of cannabis businesses to payment systems, such as credit cards and electronic transfers, and require federal regulators to issue guidance and best practices for serving the cannabis industry.

Why is the SAFER Banking Act needed?

Currently, marijuana is illegal at the federal level, but 36 states and the District of Columbia have legalized its medical or recreational use. This creates a legal conflict and uncertainty for financial institutions that want to serve the growing cannabis market, which is estimated to reach $41 billion in annual sales by 2025. Without access to banking services, cannabis businesses are forced to operate largely in cash, which poses significant risks for public safety, tax compliance, and money laundering.

Senate Banking Committee to Vote on Cannabis Banking Bill

The SAFER Banking Act would provide a clear and consistent framework for financial institutions to serve the cannabis industry without fear of federal reprisal. The bill would also benefit consumers, who would have more options and convenience when purchasing cannabis products. Moreover, the bill would enhance the transparency and accountability of the cannabis industry, which would help law enforcement and regulators combat illicit activities and ensure compliance with state laws.

What are the changes in the revised version of the SAFER Banking Act?

The revised version of the SAFER Banking Act was introduced by Senator Sherrod Brown (D-OH), the chairman of the Senate Banking Committee, on September 23. The new version includes some changes from the previous version that passed the House of Representatives in April. Some of the notable changes are:

  • The bill clarifies that federal banking regulators have a duty to ensure that depository institutions are operating in a safe and sound manner and have processes and procedures in place to identify fraudulent or illegal activity.
  • The bill gives financial regulators some discretion in terminating a deposit account if they have a valid reason, such as violations of the law, unsafe or unsound practices, or exam-related issues. However, the bill also prohibits regulators from requesting that an institution terminate an account or group of accounts without a valid reason.
  • The bill requires financial regulators to issue rules or guidance within two years of enactment that will specifically increase access to financial services in rural, tribal, low-, and moderate-income communities.
  • The bill mandates a study by the Government Accountability Office on diversity and inclusion in the cannabis industry and access to credit for minority-owned and women-owned cannabis businesses.

What are the reactions from credit unions and other stakeholders?

The SAFER Banking Act has received support from various stakeholders, including credit unions, banks, state regulators, law enforcement groups, cannabis industry associations, civil rights organizations, and public health advocates. The National Association of Federally-Insured Credit Unions (NAFCU) has expressed its support for the intent of the bill, but also shared some concerns about potential regulatory overreach and burdens in a letter to the Senate Banking Committee.

NAFCU Vice President of Legislative Affairs Brad Thaler wrote that “NAFCU supports the intent of this bill, but we are concerned that the new language in the base text could be read to dramatically increase regulators’ authorities and discretion, which could have a significant impact on credit unions.” Thaler suggested some revisions to the bill to help credit unions serve their members without undue interference from federal regulators.

The American Bankers Association (ABA) has also endorsed the SAFER Banking Act as “a pragmatic solution” to address the banking challenges faced by cannabis businesses. ABA President and CEO Rob Nichols said that “the SAFE Banking Act will help law enforcement root out illegal transactions while preserving state regulatory authority over cannabis policy.” Nichols urged Congress to pass the bill as soon as possible.

However, some lawmakers and advocates have argued that the SAFER Banking Act does not go far enough in addressing the broader issue of marijuana legalization and criminal justice reform. Senator Cory Booker (D-NJ), who is co-sponsoring a comprehensive bill to end federal marijuana prohibition, has said that he will not support any cannabis banking legislation unless it is accompanied by meaningful reforms that address racial disparities and social equity in the cannabis industry.

The Senate Banking Committee is scheduled to mark up the SAFER Banking Act on Wednesday, September 29, at 9:30 a.m. EST. The markup will be livestreamed on the committee’s website. The bill’s prospects for passage in the full Senate remain uncertain, as it will need at least 60 votes to overcome a potential filibuster.

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