House Passes SAFE Banking Act in National Defense Act, Fifth Time’s the Charm? 

By: Andrew P. Cooper, Esq., LL.M. and Terran Cooper

On Tuesday, September 21st of 2021, Members of the House of Representatives voted to include all provisions of the Secure and Fair Enforcement (SAFE) Banking Act in the $778 Billion fiscal 2022 National Defense Authorization Act (NDAA). This comes after four failed previous attempts to pass previous versions of the SAFE Banking Act as a standalone bill. The 2022 NDAA funding package was passed by the House of Representatives two days following the inclusion of the SAFE Banking Act. The SAFE Banking Act comes as one of the last amendments to the NDAA, following a number of amendments relating to the U.S. withdrawal from Afghanistan and weapons procurement spending. The 2022 NDAA has a number of “hot topics” that will require further debate, now including the SAFE Banking Act.

The SAFE Banking Act generally prohibits federal regulators from penalizing institutions (such as banks) for providing services to legitimate cannabis-related businesses. The lack of access to banking and financial services serves as one of the largest roadblocks to the growth of the cannabis industry. Specifically, under the Act, limiting or terminating the deposit or share insurance of a depository institution due to their servicing of a cannabis business would be prohibited. The Act would also prevent the asset forfeiture of institutions solely for providing services to cannabis businesses and disallow the consideration of legal cannabis-related proceeds to be unlawful proceeds. While not all-encompassing, the SAFE Banking Act would address a number of public safety issues stemming from the lack of access to financial resources and institutions by cannabis-related businesses.

There is a general belief that including the SAFE Banking Act in the 2022 NDAA increases the likelihood of it passing as compared to a standalone bill. Standalone attempts to pass the SAFE Banking Act have stalled in the Senate in its two most recent attempts of introduction.  For example, in 2019, former Senate Majority Leader Mitch McConnell failed to introduce the SAFE Banking Act to the Senate Floor. Currently, the ranking Senate democrats may change course and choose to introduce the SAFE Banking Act in this iteration as part of the NDAA. If the Senate passes its version of the NDAA, the SAFE Banking Act provisions will need to be settled in a bicameral conference. This means that representatives from both House and Senate may work to resolve differences in their respective NDAA proposals. Senate Majority Leader Chuck Schumer has expressed his desire to pass more comprehensive legislation to federally legalize cannabis over more limited banking reform. Various senators have also expressed a desire that comprehensive reform address decades of racial disparity in drug enforcement. In particular, Senator Cory Booker expressed his belief that the passing of a SAFE Banking Act would undermine the ability to accomplish comprehensive cannabis reform. While Senator Booker supports the SAFE Banking Act, he believes solely targeting the financial side of cannabis reform would be an injustice to all those impacted by the War on Drugs. Even a sponsor of the former standalone SAFE Banking Act, Senator Jeff Merkley, told Politico that he would “love to see if we can even do the more comprehensive [reform], that’d be even better.” Without the support of Senator Booker and a number of other key democrats, the SAFE Act will likely face an uphill battle in the Senate.

The SAFE Banking Act will face adversity in the Senate, and will likely need substantial bipartisan support to pass. Several Republican and Democrat legislators seem intent on standing against the SAFE Baking Act, for entirely different reasons. The situation is constantly evolving, and only time will tell the fate of the SAFE Act. While banking reform is a small step forward, ultimately, the industry would stand to benefit from comprehensive legislation that defined industry norms. However, it is uncertain what level of support such legislation has at this time, particularly in the Senate. In any event, there has been no comprehensive or substantial cannabis reform legislation introduced to the Senate floor. For the thousands of cannabis businesses eagerly awaiting any reform, even limited access to financial services and the ability to move away from a cash-only business would be quite impactful.

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.