The SAFE Banking Act Just Got Added Back to the Defense Bill as an Amendment, But Could It Pass on Its Own?
The majority of cannabis advocates and supporters in the United States were let down by the Senate’s decision to pull out the SAFE ACT from the defense bill last month. Now that the shock of the removal has abated, these groups are rallying together to look for the next way forward. Lawmakers have started work on presenting a singular bill that encompasses the benefits the SAFE ACT could bring to the country.
Like the religious people say, the removal probably happened for a reason because in the weeks after this disappointment, new and better opportunities have been presenting themselves.
A step backward
From the first day, the SAFE Act bill was introduced to the legislature some years ago, passing the bill has always turned out to be a roller coaster journey. The result over the years has been a return to the starting point. Advocates and lawmakers held out hope that last year could be the year of federal cannabis reforms, only for the senate to pull the measure out at the last minute.
Many believe that this bill closes the gap between multistage operators and some small-scale cannabis entrepreneurs who have been unable to obtain private equity. They also think that small cannabis businesses would be allowed to make more profits if the playground were leveled with the SAFE ACT bill. However, the majority of the Senate lawmakers have refused to see the light or accept the benefits vividly written in the bill, claiming the language shows a different outcome.
The reason the Senate cited for striking out the measure from the defense bill is that the measure does little to stamp down on crimes but leans in favor of the MSOs. For a bill that the House had previously passed, the Senate’s reason seems a bit weird. Anyway, it’s the new year. With a new year comes new opportunities and new congressional sessions. Advocates are linking up and working together to have a fresh go at it in Congress. The objective for 2022 is to create a more equitable bill that not only leans towards MSOs but also enhances the safety of communities around the country.
Access to Commercial Lending
Federal cannabis reforms have been a long time coming. Its absence has put a strain on legal cannabis markets and has hindered small businesses from benefiting from an excellent financial aid program. Unlike the cannabis industry, non-cannabis sectors have access to commercial lending and equity funds. The SAFE Act would address these issues. The cannabis business will be able to be served by traditional financial institutions.
As it stands, many black-owned marijuana businesses in disadvantaged communities face the brunt of being unable to access funds. The Safe Act will offer these up-and-coming businesses access to private equity funding. However, multiple service operators will be among the first to be considered.
The Future of Cannabis Banking
The approval of the SAFE Act bill does not imply that cannabis has been decriminalized. The drug would still be federally prohibited. The reform may quicken the process of decriminalization in other non-legal states. As soon as cannabis banking reform is passed, banks will be able to work with legal cannabis businesses without fearing a federal backlash.
Currently, the illegal status of cannabis puts financial institutions at loggerheads with the Controlled Substances Act. Critics argue that the SAFE Act bill may not hold the same view as banks regarding helping disadvantaged businesses compete against large-scale companies. Banks are primarily capitalists, and it’s not farfetched to assume that they’d side with the better sides. This means that having access to funding under the SAFE Act does not mean the banks would necessarily grant the funding. The bank and its lawyers will be particular about assisting only well-established and credit-worthy cannabis businesses.
What to expect this year?
The SAFE Act will definitely see another push in the coming months. Other cannabis reform bills are also expected to be introduced to Congress and the House this year. Recently, a commercial lending professional drafted a proposed guideline for financial institutions to follow during the decision-making process under the SAFE Banking Act. Businesses will be selected based on a list of criteria. It’s not looking suitable to diversely-owned firms as they would be unable to meet most of the measures listed.
According to a report issued by the Federal Reserve in 2021, black and Latino-owned businesses are least likely to be favored for commercial loans, unlike white-owned businesses. Many financial institutions consider black and Latino businesses as high risks. Only those who have been investigated to be low risks receive loan approvals. This indicates that expectations of the SAFE Banking Act may be cut short, not by lack of service but insufficient funding. Without enough funding, social equity operators will remain unable to compete with the MSOs.
About the SAFE Banking Act
The Secure and Fair Enforcement (SAFE) Act is a bill that would bridge the gap between cannabis businesses and financial services. Cannabis companies will gain access to regular and digital banking services from traditional financial institutions across the country. It would also open up the cannabis industry to outside investors by bringing national and regional banks into the fold. The SAFE Act will make an immense contribution to the growth of the sector by helping to generate billions and millions of dollars.
Though defeated in this round, the cannabis industry remains resilient in its fight for federal reforms. The removal of the SAFE Act from the defense bill is not the end of the road but rather another indication of the steep climb to federal cannabis law.
Cannabis advocates and entrepreneurs need to use this opportunity to reset the conversation and seek a well-rounded bill that would ensure the capital is available to those who need it the most. Now that there is still a political advantage, advocates can point out other solutions that can be added to the bill to make the cannabis industry get access to funds at the state and local levels.