Congress just opened the started gates for the cannabis industry. For years, cannabis businesses have largely relied on private funding and investing to grow their business. The lack of protection for banks severely stymied growth; those days are over.
Support and financial banking for the cannabis industry lagged far behind demand and, for many states, legislation. Social and legal acceptance of cannabis and cannabis-related products like hemp have far outpaced the infrastructure needed to provide stable financial footing for growth. Banks have been either barred or leary from giving growers or retails the loans needed to grow and be competitive. This September, the House Representatives appear to have changed the futures of cannabis with a resounding 321-103 vote to pass the Secure and Fair Enforcement Banking Act, known in the chamber as the SAFE Banking Act.
The bill is designed to protect state and federal financial institutions than serve support cannabis businesses. If the bill makes it into law, the resolution provides some much-needed stability in an industry that is now worth billions of dollars per year.
The SAFE Banking Act is the first marijuana legislation to make it through either congressional body, a reflection that illustrates just how far behind federal legislators are to their state-level counterparts. Thirty-three states now have some form of marijuana legalization, with even more offering medical marijuana legislation, and there’s every indication that more states will have cannabis legalization on the books over the next two years.
Those same federal representatives are quickly making up ground, however. The bill, first announced in March, saw votes from nearly every Democrat and nearly 100 Republicans, as well as overwhelming support from some of the countries largest banking firms. It’s certainly an interesting piece of legislation; the bill shields banks from any criminal prosecution stemming from sales or services to cannabis businesses in states where marijuana is legal. However, the federal prohibition on marijuana and trafficking remains firmly in place. In effect, it makes a state’s decision on cannabis the law of the land, albeit it only in that land.
It’s worth noting that the Senate has a similar bill that’s under revision, although there’s no consensus that their version would get the same support. In fact, it isn’t certain that their version of the same banking bill will even see the Senate floor in 2019. Growers, retailers, and banks have urged the Senate to follow the House’s lead, but it’s too soon to say if Senate Majority Leader Mitch McConnell would bring it to the floor for discussion.
We’re watching this legislation just as closely as our clients; these businesses need the same financial services as other firms, and it’s important to remember that these are the funds necessary not just to build a competitive industry, but one that can afford to invest in the infrastructure that will improve energy efficiency and improve sustainability in an energy-intensive industry. If we want to save the planet, we need to make sure this multi-billion dollar sector grows the right way.