SAFE Banking Act Dies in Senate

If SAFE Banking is the Low-hanging Fruit, Why is it Still Out of Reach?


Why Even the Low-hanging Fruit Remains Out of Reach

More than 2,300 bills have been signed into law in the eight years since Colorado Representative Ed Perlmutter first introduced what would eventually become the Secure and Fair Enforcement (SAFE) Banking Act of 2021.

Even then, before the 2014 Farm Bill cracked the door for industrial hemp and only two states had yet legalized adult-use cannabis, Perlmutter’s bill was viewed as an uncontroversial solution for an increasingly obvious problem born of the state/federal disconnect on cannabis.

A map of cannabis legality in the U.S. as of 2021
Since the bill was introduced: 19 states have legalized adult-use cannabis

Given the trend towards legalization in the states and in public opinion, the 2013 thinking went, surely a fix for banking is right around the corner. But, though Congress adopted a budget amendment to shield state-legal cannabis from enforcement of federal laws just the next year —somehow, in December of 2021, the SAFE Banking Act is still not happening.

It shouldn’t be an issue for hemp at all, of course, but everyone in the industry is familiar with the account closures, service cancellations, inflated fees, and other problems that still throw up roadblocks to commerce for hemp businesses of every size and shape.

So, why isn’t this bill happening? And, if the SAFE Banking Act is passed by this Congress, will it really cure the hemp industry’s financial services woes?

First Ever Picture of a Black Hole
Since the bill was introduced: Mankind used a planet-sized array of radio telescopes to take the first ever picture of a supermassive black hole at the heart of a distant galaxy

Let’s start with the last question because the answer is pretty straightforward: No, passage of the SAFE Banking Act will not solve all of the problems the industry faces with banking and financial services. The 2021 version includes new language designed to address some outstanding impediments to hemp commerce and instructions for financial regulators to provide clear guidance to lending institutions working with hemp and CBD businesses —all of which could have significant positive effects. But the highly risk-averse financial sector will in all likelihood continue to create at least some additional costs to doing business with cannabis, hemp or otherwise, so long as the plant remains scheduled under the Controlled Substances Act. 

So: SAFE Banking would make a difference, it has an impressive40 bi-partisan co-sponsors in the Senate, and the House has done their part by passing the bill five times. Most recently, they House passed it by adding it as an amendment to the National Defense Authorization Act (NDAA)  in the hopes that the “must pass” nature of the defense spending bill would carry SAFE Banking across the finish line. A smart gambit, but even that proved unsuccessful —the amendment was stripped from the bill in the Senate. 

Chicago Cubs championship celebration
Since the bill was introduced: The Chicago cubs ended a 108-year drought by winning the World Series

Because Banking has nothing to do with funding the national defense, you ask? You’d think something like logic would be at play, but instead the culprits are simply polarization and politics.

Polarization is deeply embedded in the bedrock of DC at this point and the Senate, with its two-per-state allocation and nice round number of Senators, serves as a kind of the fault line where the tectonic plates press unimaginable force against one another. Rarely budging, creating a lot of collateral damage, and —every so often— belching up some new molten creation to become actual law. Whatever its root causes, polarization is a force of nature that must be reckoned with in DC. That’s what successful politicians do.

In this instance, the leadership in the Senate, along with Democratic Senators who actually support the SAFE Banking Act’s provisions, tanked the amendment to the NDAA because they prefer to hold out in favor of adding banking to a more comprehensive cannabis reform bill to end federal prohibition.

In so doing, those politicians violated a basic principle of legislating —they let the perfect become the enemy of the good.

Politics is the art of compromise; of knowing what is possible now and seizing those increasingly few opportunities for progress and then holding that ground.

The bitter irony here is that the success of the cannabis legalization movement itself is a perfect illustration of this principle in action.

Starting in the 1970’s, cannabis activists focused on passable laws in the states, proposing ballot measures and legislation in conservative states that moved each incrementally, over a course of decades, first towards decriminalization, then MMJ, and so on. None of those state victories were complete —or even good enough— at the time, but they represented tangible progress that could be improved and built upon. And with hemp legal everywhere, MMJ legal in 46 states, and adult-use cannabis legal in 18 —the legalization movement has established a record of effectiveness it is hard to debate.

It is hard to understand how seasoned lawmakers could assess today’s political climate and reasonably think that something as ambitious as the Cannabis Administration and Opportunity Act (which ends prohibition and makes a healthy stab at reinvesting in underserved populations blighted by the War on Drugs) is even remotely plausible.

Stripping the SAFE Banking amendment from the Defense spending bill in favor of including it in all-encompassing legislation that fixes everything is akin taking a burger out of someone’s hands and telling them they can eat a full five-course meal just as soon as the Tooth Fairy delivers it: Undeniably cool if it were to happen, but not exactly likely.

But the free market is its own force of nature, and while a legislative banking fix may continue to remain elusive, a greater number of banks, insurers, investors and financial service providers are finding a market opportunity by serving hemp businesses. Innovation and competition will inexorably lead to more and better financial products to support hemp enterprises.

On banking and financial services, as with so many issues, the hemp industry will find ways to evolve and continue to advance the hemp economy.

Hopefully, our lawmakers won’t be too far behind.

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