Industry Not Happy That Safe Banking Got Canned

In Congress, a new version of the National Defense Authorization Act (NDAA) did not include cannabis banking reform and the cannabis industry is pretty ticked off. The House originally passed its initial version of the NDAA in September that included the language that would protect banks that work with state-legal cannabis businesses. The new Act did not include those provisions. In a sort of hail mary pass, Rep. Perlmutter filed an amendment in committee to attach the marijuana language to the legislation— but he ultimately didn’t insist on a vote. Rep. Dave Joyce (R-OH), who is not on the Rules Committee but who is a co-chair of the Congressional Cannabis Caucus, said it is “incredibly disappointing” that the cannabis language was taken out of NDAA.

Marijuana Moment also reported that “the new defense bill also excludes an NDAA amendment filed by Sens. Dianne Feinstein (D-CA) and Brian Schatz (D-HI) that would have streamlined the application process for researchers who want to investigate cannabis as well as manufacture the plant to be used in studies. It also doesn’t include a separate Schatz-led amendment to federally legalize medical marijuana for military veterans who comply with a state program where they live.”

Senator Schumer has insisted on focusing on full marijuana reform instead of tackling safe banking as a separate issue. This latest iteration will now go through both chambers again before potentially being sent to the president’s desk.

Cannabis industry executives were not pleased, to say the least.

“It’s disappointing to see cannabis banking ignored by lawmakers, when the reality is countless cannabis businesses are dealing with great pressure to access affordable traditional financial services, while adhering to their financial compliance obligations, and in trying to do so, continue to face treatment of a second class citizen. Until we have a solid system in place for banking opportunities, we will continue to see distrust in and of our industry, while permeating the challenges of transparency, regulation, and oversight. With all that being said, I will have to admit that I am not surprised by the lawmakers decision in pulling the plug on formal cannabis legislation making its way into a bill. Supporting the cannabis industry on a federal banking level (not legalization) will come with much greater regulatory oversight, not less, and it is apparent that lawmakers and regulators are grappling with a program that will protect the financial system and all its stakeholders. There is no denying the need to address it, it’s just to what length will regulation take it.” – Mark Lozzi, CEO of Confia

“Safe Banking is needed in the cannabis industry like any other real industry, the pandemic has proven the resilience of this market and the government moving as slow as it does is sheer proof that this industry needs disruption from the banking community. Payzel has been designed to work with the true banking leaders of our space and has even awarded the real banking innovators who have stepped up to support the industry in the hundreds of millions already loaned into this space to drive growth forward. These banks are what we lovingly call Frontier Finance Institutions. ”  Todd Kleperis, Founder Payzel

“Even if the SAFE Banking Act had made it into the final version of the NDAA, I am skeptical that banks would have adopted it and openly started doing business with cannabis companies. To see real reform for the industry we need standalone legislation that becomes law, not a rider to a spending bill that needs to be reauthorized every year.” – Arnaud Dumas de Rauly, CEO & co-founder of the Blinc Group

 “The federal government has to address the current climate marijuana businesses are forced to operate in, and help the industry through effective legislation,” said Ryan Hale, Chief Sales Officer at Operational Security Solutions (OSS). “This industry faces serious compliance and security issues, and business leaders struggle to find solutions. Meanwhile, we also aren’t surprised, as forcing SAFE Banking into the NDAA was observed by many to be a way to force its passage, without effective discussion and bipartisan support that the issue deserves.” – Ryan Hale/Operational Security Solutions

“The hard truth is that many banks may be servicing cannabis companies without even realizing it. Eventually, this often leads to many regulation and compliance issues when they get discovered by larger financial organizations such as the IRS. Less than 700 banks in the US are knowingly serving cannabis companies because they are fearful of the potential consequences on the federal level. It’s a shame that SAFE Banking has been removed from the defense spending bill because, if passed, it could have encouraged many more financial institutions to create cannabis banking programs and allowed more cannabis-related businesses to end their high-risk, dangerous cash-only operations and operate with the same level of safety as other significant revenue-generating industries.” – Andrew Montgomery/HD Compliance

“It’s a shame but not a surprise that once again cannabis has been excluded from vital legislation in the US. The SAFE Banking Act could bring a lot of equity and security to the cannabis industry but still, it continues to be overlooked. Until we give cannabis companies fair and safe access to banking, it isn’t likely that the legal cannabis industry will outpace the rapidly growing illicit one. Many legitimate cannabis companies haven’t been able to spend the time or resources to join the legal cannabis industry because of the significant lack of banking and lending services. We are hopeful that other legislators will pick up the bill and either try to get support across the aisle once again as a standalone issue or weave it into other important legislation in early 2022.” – Blake Schroeder/Medical Marijuana Inc.

One voice reasoned that it actually may all work out.

“Perhaps, as some have suggested, this creates more of a potential opening for legalization in 2022. I personally think that’s correct, because the risk to the industry is that the President signs SAFE Banking, and then Congress does nothing else for a long time (because it already made an accommodation for the industry), leaving cannabis with modestly useful change to two aspects of doing business and nothing else. Or maybe, if the legalization push fails, there’s chatter about whether Congress might expand SAFE Banking to include non-bank financial services and 280E relief.” – Marc Hauser Counsel and Chair, Cannabis Practice Team at Reed Smith LLP, and Author of Cannabis Musings

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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