On September 25, the US House of Representatives voted 321-103 in favor of the Secure and Fair Enforcement (SAFE) Banking Act. It was the first stand-alone cannabis reform legislation passed by a chamber of Congress in US history. The SAFE Banking Act would eliminate restrictions on banks and financial institutions that serve state-legal cannabis businesses.
Currently, banks that open accounts for cannabis businesses risk being prosecuted for money laundering, due to the federal Schedule I narcotic status of cannabis. As a result, cannabis businesses without banking options are left handling large amounts of cash sales, which may create a security risk. They’re also denied services such as credit and loans.
The SAFE Banking Act still needs to pass a vote in the US Senate and be signed off by President Trump before it becomes law.
But would this potentially historic reform—a good thing in and of itself—significantly help small cannabis businesses, and particularly entrepreneurs seeking licenses through city and state-level cannabis social equity programs? Advocates are not so sure.
“I’m afraid that this will reinforce the highly inequitable and restricted cannabis markets we have.”
“Generally, access to banking would be beneficial and is something the new industry needs,” said Sieh “Chief” Samura, a co-founder of cannabis brand Purient & 612 Studios in Massachusetts. “But in practice and in reality I’m afraid that this will reinforce the highly inequitable and restricted cannabis markets we have.” Samura qualified for the state’s Economic Empowerment program, part of its social equity program.
The problem is not necessarily the reform itself, but the underlying fact that the legal cannabis is still largely segregated on gender and racial lines. The primary beneficiaries of banking reform, Samura told Filter, will likely be the largest cannabis companies. These tend to be white- and male-dominated.
“I look at everything from the social equity lens,” he said. “And I ask, how does this end prohibition? I just see this as serving to protect a new legal industry that is being created without people of color.”
For people in the industry who have been most impacted by prohibition, banking reform doesn’t address many of the real-life problems they face.
“Banking has been used as a ‘red herring’ to explain why our social equity licenses are moving so slowly,” said Kobie Evans. As Filter has reported, Evans is co-founder of Pure Oasis LLC, the first social equity dispensary to receive a provisional license in Boston.
“The reality is we don’t have a banking problem, our problem is primarily host community agreements,” he told Filter. Host community agreements (HCAs) in Massachusetts must be developed between cannabis businesses and the cities in which they operate. “People will say we aren’t getting licensed because there’s no banks that will lend to us—but there’s no banks that lend to anyone in the industry.”
Funding instead comes mostly from investors, said Evans—and there’s little shortage of those. “Everyone wants to invest in the industry, whether they have $10,000 in the bank, or $100 million. We realize that raising money isn’t the main issue.” Evans maintains that the HCA requirement in Massachusetts disadvantages social equity businesses, because the wealthiest and most politically-connected businesses are better able to navigate that process with city governments.
“It would be great to have to worry about banking, insurance and funding, but most people can’t even reach that point.”
With the slow progress of social equity programs and the granting of licenses, many cannabis entrepreneurs in this category haven’t yet had to deal with how to safely handle their revenues. “These are aspirational problems to have if you can’t get in the industry,” Evans said. “It would be great to have to worry about banking, insurance and funding, but most people who want to be licensed business owners can’t even reach that point.”
The more immediate effect of the SAFE Banking Act would be the creation of a new profitable industry for banks that service cannabis companies. Both Samura and Evans agreed that these “cannabis bank accounts” are not attractive to smaller cannabis businesses. They typically charge high fees and have high minimum balance requirements.
“We won’t get access to a normal business banking account,” Samura said. “We will essentially be charged extra just for the privilege of doing business as a cannabis company. That won’t do well for people trying to break into the licensed market.”
A September 25 statement issued by the Drug Policy Alliance expressed similar concerns—while also worrying that victory on the Safe Banking Act might even take the wind out of other, vital reforms.
“We had no objections to the substance of the SAFE Banking bill,” said Policy Coordinator Queen Adesuyi. “However, DPA and allies from the civil rights community sent a letter of concern because we believe it is a mistake for the House to pass an incremental industry bill before passing a comprehensive bill that prioritizes equity and justice for the communities who have suffered the most under prohibition. We have long feared that passing SAFE Banking would undermine passage of the MORE Act by taking the momentum out of marijuana reform.”
Reflecting this, the advance of the SAFE Banking Act has caused a fissure between Democratic lawmakers and cannabis activists. Marijuana Moment reported that advocates including the Drug Policy Alliance claim the House Financial Services Committee Chair, Representative Maxine Waters (D-CA), broke a promise she made earlier this year to prioritize cannabis social justice and expungement reforms by first advancing the MORE Act.
It remains to be seen, then, whether the SAFE Banking Act, for all the progress it represents, will advance the goals of social equity and justice in cannabis.
“But this is the beginning,” Samura pointed out. “We have to start somewhere, and hopefully this leads to much more meaningful reform. We’re already circulating a lot of money in the economy. We need banking that will serve the entire industry and not just those at the top.”
Photo by Tim Evans, via Unsplash.