Senate to tackle cannabis banking bill, but House passage unlikely
Senate to tackle cannabis banking bill, but House passage unlikely
The U.S. Senate Banking Committee is expected to approve a long-awaited cannabis banking bill next week that would benefit the hemp industry, but significant legislation is unlikely to pass this year.
Although the Democrat-led Senate is likely to pass S. 1323, the Senate version of the Secure and Fair Enforcement (SAFE) Banking Act, many observers believe that the Republican-controlled House of Representatives will postpone consideration of the bill until after the 2024 presidential election.
Confusion
Since the 2018 Farm Bill legalized hemp federally, makers of legal hemp products have been eligible to operate within the existing banking framework. However, most banks refuse to work with hemp businesses due to confusion regarding the distinction between marijuana and hemp. While the main purpose of the bill is to establish clear banking guidelines for marijuana operators, the SAFE Act will eliminate this confusion.
Current regulations discourage banks from offering financial services to marijuana businesses because these products are classified as Schedule 1 drugs and are not federally legal, despite being allowed in up to 40 states. Banks face the risk of losing their federal deposit insurance, as well as potential criminal prosecution, liability, and asset forfeiture when serving marijuana companies.
Lawmaking gridlock
A measure like this, which generally garners support from both Republican and Democratic lawmakers, has been in existence since 2017. The House of Representatives has passed their version of the SAFE Act seven times, but the Senate has never voted on it, with one version stalling in the Senate process last year. Now, the situation could be reversed.
Jaret Seiberg, an analyst at TD Cowen Washington Research Group, stated in a MarketWatch article earlier this month that the most likely path for the legislation would be as a provision in a year-end package in 2024, enacted during a lame-duck session. He suggests that even this scenario could be an uphill battle.
Superfluous?
According to some experts cited in an American Banker article, the SAFE Act may be unnecessary because banks have already adapted to serve the industry adequately since marijuana legalization at the state level. Robert Baron, a cannabis banking and risk management expert, claims that the solutions the SAFE Act offered to marijuana banking six years ago have become obsolete, and implementing the measure may further burden banks with compliance-related issues involving their cannabis clients.
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