Landmark cannabis banking bill scores a win
A landmark federal bill that would protect banks that work with cannabis companies appears headed to the Senate floor after passing out of committee on Wednesday.
Why it matters: Since marijuana is legal in some states, but illegal at the federal level, the industry has long struggled to gain access to financial services — instead many business owners are forced to deal with the inconveniences and dangers of transacting in all-cash.
- Though its path to passage is anything but assured, the bill's advancement is an incremental win for the cannabis industry and the banks that'd like to handle all the green (sorry) it generates.
- The bill could also nudge the door open a little to the federal legalization of cannabis.
State of play: There's fairly broad bipartisan agreement that state-sanctioned cannabis companies should have access to the banking system.
- "The current all-cash model of legal cannabis businesses makes them targets for theft, tax evasion, and for organized crime," said Sen. Steve Daines (R-Mont.), one of the bill's sponsors, at a banking committee hearing Wednesday. "The key to addressing this risk is by ensuring that all legal businesses have access to the banking system."
- Senate Banking chair Sherrod Brown (D-Ohio) emphasized the bill would help the industry's workers, who "face challenges proving their income when trying to rent a home or apply for a mortgage."
The intrigue: The issues complicating the bill's passage are a bit outside its narrow scope.
- On the right: Conservatives want to ensure that banks can't turn away other industries that might be deemed controversial — particularly gun companies and energy companies.
- A portion of the bill that appears to give regulators wide discretion to force a bank to drop a customer — if there's "reputation risk" — has been hotly contested.
- On the left: There's concern the bill could reinforce racial and class inequities. That's because the legal cannabis business, which the bill helps, is majority-white owned. But many people of color are still arrested for marijuana possession — or have criminal records for past cannabis offenses.
What they're saying: These conflicting views are going to make it tough to pass the bill in the Senate, said Cowen analyst Jaret Seiberg in a note.
- Still "this is a tremendous symbolic win for the cannabis sector."
- The American Bankers Association issued a statement supporting the legislation.
Zoom in: The Secure and Fair Enforcement Regulation Banking Act, or SAFER, passed out of committee by a 14-9 vote — with three Republicans in support.
- Under the bill, banks can't be penalized for providing services to state-sanctioned marijuana businesses.
- Similar legislation has passed the House seven times before — but never made it out of a Senate committee, notes Banking Dive.
Zoom out: The fight over the bill underscores how critical access to the banking sector is for anyone seeking to do business in the U.S. — a lesson learned by the crypto industry over the last year.
What's next: Senate Majority Leader Charles Schumer (D-NY) said earlier this month that he'd bring the bill "to the Senate floor with all due speed."
- And on Wednesday he said he'd tie the legislation to other bills that would make it easier for states to expunge cannabis offenses.
- Meanwhile, a government shutdown looms.