As Congress seeks to address cannabis reform policy in greater measure than ever before, the U.S. Senate on Thursday held a pivotal hearing on the future of cannabis banking. Though no votes were taken at the hearing, called “Examining Cannabis Banking Challenges of Small Businesses and Workers,” much of the discussion focused on the bipartisan Secure and Fair Enforcement (SAFE) Banking Act. With the SAFE Banking Act up for debate in the Senate for the fourth time since its 2019 introduction, cannabis professionals anxiously watched the proceedings of the Senate Committee on Banking, Housing, and Urban Affairs as politicians and private citizens alike gave testimony.

What Is The SAFE Banking Act?

The SAFE Banking Act would allow mainstream financial institutions to provide services to cannabis businesses in legal states, although its passage would not alter the plant’s federally illegal status. Rather, it would create a pathway for cannabis businesses to gain access to certain legitimizing services such as proof of workers’ income that would greatly improve the industry’s standards of safety. Some have even argued that SAFE Banking could repeal U.S. Code § 280E for cannabis companies, the law that prohibits businesses trading in Schedule I substances from deducting certain expenses from their taxes. (However, it has not yet been confirmed that the bill’s passage would definitively impact the tax code.)

Senator Jeff Merkley, co-sponsor of the latest iteration of the SAFE Banking Act. Screengrab via U.S. Senate Livestream.

Senate Committee Testimony On The SAFE Banking Act

At the May 11 hearing, Banking Committee Chairman Sherrod Brown (D-OH) opened proceedings by saying, “The cannabis landscape looks far different than it did a few short years ago.” Noting that cannabis has been legalized or decriminalized in a majority of states across the nation, he continued, “Banking, of course, is critical for small cannabis businesses who already face hurdles getting their businesses off the ground… Without full access to banking services, cannabis businesses are forced to operate in the shadows.”

While Ranking Member Tim Scott (R-SC) agreed that banking is crucial to a business’s operation and that “we must discuss the importance of banking all industries,” he admitted that he was not in favor of legalizing cannabis. Further, he raised concerns that the SAFE Banking Act could “create loopholes in our money laundering laws making it harder to catch criminals that traffic weapons, fentanyl and even people.” Seemingly ignoring the bipartisan nature of the bill, he accused the legislation as being symbolic of financial institutions “caving to pressure from the Radical Left.”

Senator Tim Scott, Ranking Member of the U.S. Senate Committee on Banking, Housing and Urban Affairs. Screengrab via U.S. Senate Livestream.

Senators Jeff Merkley (D-OR) and Steve Daines (R-MT) appeared for the first “panel” of the hearing; the two were responsible for refiling the bill back into consideration in April. Merkley explained the dangers of the industry’s current financial operations. “Three-quarters of the cannabis economy operates in cash,” he described. “The cash-only situation trickles down far beyond the cultivators and retailers to all in the supply chain… Forcing legal operators to operate cash-only is terrible for the economy but it’s great for crime. There is nothing like a cash economy to facilitate money laundering.”

Emphasizing that “federal law has not kept pace with Americans’ changing attitudes toward cannabis,” Merkley framed the SAFE Banking Act as a necessity for public safety.

Senator Steve Daines, co-sponsor of the latest iteration of the SAFE Banking Act. Screengrab via U.S. Senate Livestream.

Daines also expounded on the public safety issue, citing that 2022 saw over 100 armed robberies of cannabis businesses in Washington State and 129 in Oregon. Only 9 percent of American financial institutions - approximately 700-800 banks - have agreed to provide services to companies in the cannabis industry. With SAFE Banking, the federal government will have a means to distinguish between legal and illegal cannabis businesses, and states will have a pathway to increase their tax revenues. The cash-only system that most businesses are forced to rely on puts ancillary service providers at risk as well. Under the current framework, roofers or electricians who serve cannabis businesses could be in danger of facing money laundering charges.

Legal adult-use cannabis sales began in Daines’s home state of Montana in January 2022. Although the senator commented that he personally does not support cannabis legalization, he recognizes that his constituents voted in favor of it, and reminded those listening to the hearing that passing SAFE Banking would not make the plant federally legal.

“This bill would make it easier for marijuana businesses to put their cash into banks,” Daines summarized. “It’s really not that complicated… The people in states across this country have spoken, and it’s abundantly clear that the status quo is not only untenable, it’s very dangerous.”

Ademola Oyefeso of the United Food and Commercial Workers Union. Screengrab via U.S. Senate Livestream.

Cannabis Banking For Workers: Ademola Oyefeso Of The United Food And Commercial Workers Union

A second panel came before the Committee to give testimony on the issue at hand. Ademola Oyefeso, Director of the Legislative and Political Action Department at the United Food and Commercial Workers Union, focused his remarks on the cannabis industry’s responsibility to protect its workers.

“All jobs have challenges, but few have the obstacle of federal prohibition on access to banking,” Oyefeso asserted. “The majority of the people in the cannabis industry are workers, not owners, and lack of banking has become a real issue for this growing workforce.” If these employees are to have access to safety, he argued, “Congress must directly address the cannabis banking challenge.”

He detailed that lack of banking makes it harder for workers to get personal loans and that those without proof of income need to pay higher mortgages. Further, these workers continue to face negative stereotyping associated with cannabis and the passage of SAFE Banking would help break the stigma. “Cash puts workers in physical danger,” Oyefeso attested. “Cannabis businesses are forced to have large amounts of cash on hand, putting targets on the backs of workers and customers alike.” Moreover, discussing the robberies and violence that cannabis employees may be exposed to in the cash-only economy, he underscored that “Cannabis banking is an equity issue… The emerging cannabis industry presents an unparalleled opportunity for the government to shape an industry from the ground up.” Finally, he reiterated that in this situation, there is a high road and a low road for the government to choose - the former ensuring unionized jobs with good benefits, the latter subjecting innocent workers to dangerous conditions.

Michelle Sullivan of Dama Financial. Screengrab via U.S. Senate Livestream.

Compliance In Cannabis Banking: Michelle Sullivan Of Dama Financial

Michelle Sullivan, Chief Risk and Compliance Officer for Dama Financial, works for a company that has provided banking services to cannabis companies for years. She argued for a sorely-needed compliance framework for the industry, believing that the SAFE Banking Act could be even stronger and create more niche avenues for businesses, such as legacy cash deposits. Even so, Sullivan advised, enhanced due diligence would be crucial: “Just because cash gets banked, it doesn’t mean money laundering is not occurring… It would be a money launderer’s holiday if the federal government does not take this seriously.”

The compliance expert also pointed out that access to credit cards could remain problematic for cannabis businesses or workers, because the bill won’t legalize the plant on the federal level. “Without solving the larger decriminalization issues, we worry that the passage of the SAFE Banking Act alone could make problems worse by giving us a sense of resolution while huge conflict in federal law still exists,” Sullivan attested. “This will still make it difficult for some financial institutions to proceed.”

Cat Packer of the Cannabis Regulators of Color Coalition. Screengrab via U.S. Senate Livestream.

Community Impact And SAFE Banking: Cat Packer Of The Cannabis Regulators Of Color Coalition

Cat Packer, formerly the City of Los Angeles’s first cannabis regulator, testified in her current capacities as Vice Chair of the Cannabis Regulators of Color Coalition (CRCC) and the Director of Drug Markets and Legal Regulation for the Drug Policy Alliance (DPA). To illustrate the perils and unwieldiness of the cash-only ecosystem, Packer explained how Los Angeles needed to establish a specific cash-handling unit at City Hall for cannabis businesses. In Fiscal Year 2022, the city collected over $2.3 million in cash. She additionally championed the importance of credit unions being granted Safe Harbor to deal with cannabis companies and workers, as they’re typically serving communities harmed by the War on Drugs. Recent provisions to the SAFE Banking Act have extended legal protections to Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) that choose to work with cannabis businesses, which Packer sees as an encouraging sign of “common-sense legislation.”

“However more can, and should, be done to ensure that all communities have the opportunity to benefit from this limited but critical reform,” she testified. “Fortunately, with a few additional minor and technical amendments the SAFE Banking Act could be a significantly improved means to promote fair access to banking for those participating in the hemp and cannabis market.”

Among her suggestions, Packer recommended that specific language be included in the bill so that “red flags,” such as prior criminal convictions for cannabis-related charges, won’t bar entrepreneurs from receiving banking services, and that financial regulators regularly provide guidance on the SAFE Banking Act so that banks can avoid unfairly penalizing those criminalized by the War on Drugs.

“Without this type of change, cannabis criminal records will continue to be a significant barrier towards participation in state-legal marijuana industries, disproportionately impacting Black and Brown entrepreneurs and undermining state efforts to address barriers associated with cannabis criminal records,” Packer said.

Finally, while the bill does require the U.S. Government Accountability Office (GAO) to study financial barriers affecting the cannabis industry, Packer insisted that a diversity report from the agency should clarify that would address barriers to marketplace entry and competition. She also felt an additional report should be published on how to resolve those issues.

Kevin Sabet of Smart Approaches to Marijuana. Screengrab via U.S. Senate Livestream.

Opposition To Cannabis Banking: Kevin Sabet Of Smart Approaches To Marijuana

Distressingly, the panel gave an inordinate amount of time to Kevin Sabet, co-founder and CEO of the anti-cannabis organization Smart Approaches to Marijuana. Sabet used the majority of his space for testimony to promote his staunch prohibitionist views, reiterating information designed to scare the public. Calling the SAFE Banking Act “the Addiction Banking Act,” the activist accused the bill of “[purporting] to fix a fake problem” because “there are hundreds of banks working with pot businesses.”

One has to wonder if Mr. Sabet was absent for the statement that only 9 percent of financial institutions across the country serve the cannabis industry. While that does amount to roughly “hundreds” of banks, many of these are not accessible for the average cannabis business, entrepreneur or worker. Of course, the so-called “quarterback of the anti-drug movement” was also the only panelist to tweet the wrong date of the hearing. During his testimony, he continued to perpetuate myths about the legal cannabis industry empowering cartels, argue about a study that linked cannabis use with suicidality in young adults (a study which does not consider that young adults with depression might simply be consuming more cannabis as a form of treatment for their trauma), and most dangerously, conflate the toxicity of synthetic marijuana with the perceived dangers of legal, regulated cannabis. The legal cannabis industry has standards for a reason, including being able to verify cannabinoid products that are safe for public consumption.

As much as Sabet would like Americans to believe that cannabis is the biggest threat to the public today, that just does not compute when we’re faced with a country where book banning, racism, homophobia, and restrictions to bodily autonomy are on the rise. If, in such a landscape, you think giving credence to an industry that creates education, generational wealth, community reinvestment, and access to more effective and equitable healthcare is dangerous - then maybe the problem lies with you.

What's Next For The SAFE Banking Act?

Following the hearing, both politicians and citizens alike overall seemed pleased with the proceedings. Chairman Brown has said before that he expects senators to “move quickly” on the latest iteration of the SAFE Banking Act. Senate Majority Leader Chuck Schumer (D-NY) has remarked that he intends to introduce further provisions to the bill that will include expungement for people previously incarcerated on cannabis charges. As the nation waits to hear about SAFE Banking’s next twist of fate, we may want to remember Senator Daines’s words: Whatever our personal opinions on cannabis legalization, this bill and this moment are about addressing the human factor. And in that view, the SAFE Banking Act is nothing if not common sense.

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U.S. Senate Committee on Banking, Housing and Urban Affairs

Tim Scott

Steve Daines

Dama Financial

Cannabis Regulators of Color Coalition

Drug Policy Alliance

Ademola Oyefeso

Michelle Sullivan

Cat Packer


Featured image: Senator Sherrod Brown, Chairman of the U.S. Senate Committee on Banking, Housing and Urban Affairs. Screengrab via U.S. Senate Livestream.