A bid to include the SAFE Banking Act in a must-pass defense spending bill has failed, leaving advocates searching for a way to pass the legislation that would grant the legal cannabis industry access to banking services. Proponents of the measure had hoped to include provisions of the banking bill, known as the Secure and Fair Enforcement (SAFE) Banking Act, in the National Defense Appropriations Act (NDAA), an annual spending bill that funds the military. But the latest version of the NDAA released on Tuesday did not include the cannabis banking language.

Under the SAFE Banking Act, federal banking regulators would be prohibited from penalizing banks that choose to serve cannabis firms doing business in accordance with state law. Under current regulations, banks are subject to penalties under federal money laundering and other laws for servicing such companies, leaving the cannabis industry to operate in a risky environment heavy in cash. 

The legislation was initially introduced in the House in 2013 by Democratic Rep. Ed Perlmutter of Colorado, who has reintroduced the bill each subsequent congressional cycle. The bill has been passed seven times since 2019 by the House of Representatives, but each time the Senate has failed to bring the legislation to the floor for a vote.

Another amendment supported by cannabis policy reform advocates that would have given the states assistance with expunging past marijuana-related convictions also failed to make it to the final version of the defense spending bill. Before the latest text of the NDAA was released on Tuesday, Senate Majority Leader Chuck Schumer of New York told reporters that he was still working on getting the cannabis banking measure passed.

“It’s a priority for me,” Schumer said. “I’d like to get it done. We’ll try and discuss the best way to get it done.”

Republicans Balk At Adding SAFE To Defense Bill

But later in the day, Senate Minority Leader Mitch McConnell of Kentucky admonished Democrats for attempting to attach amendments not related to defense, including the SAFE Banking Act, to the spending bill.

“Even now, House and Senate Democrats are still obstructing efforts to close out the NDAA by trying to jam in unrelated items with no relationship to defense,” McConnell said on the Senate floor on Tuesday. “We’re talking about a grab bag of miscellaneous pet priorities — like making our financial system more sympathetic to illegal drugs, or the phony, partisan permitting-‘reform’-in-name-only language that already failed to pass the Senate this year.”

“If Democrats wanted these controversial items so badly, they had two years to move them across the floor. Heck, they could have scheduled those matters for votes this week. But no — we’re doing more mid-level nominations, while Democrats keep half-threatening to take our Armed Forces hostage over these extraneous matters,” said McConnell, adding “The Democrats’ failure to plan ahead for unrelated liberal pet priorities should not be creating uncertainty and confusion for the brave servicemembers who keep us safe. My colleagues across the aisle need to cut the unrelated hostage-taking and put a bipartisan NDAA on the floor.”

What’s Next?

The failure to include the SAFE Banking Act in the NDAA leaves the prospect of passing the cannabis banking legislation before the current Congress adjourns in two weeks unsettled. Morgan Fox, the political director for the cannabis policy reform group the National Organization for the Reform of Marijuana Laws, said that SAFE could be attached to a pending omnibus appropriations bill or perhaps be approved as standalone legislation.

“I’m glad that we still have other options,” Fox said Wednesday. “It’s pretty disappointing.”

“While there has been momentum and optimism around getting SAFE included in the National Defense Authorization Act, it has been known for some time that getting this through would be a challenge,” Sahar Ayinehsazian, partner at the cannabis law firm Vicente Sederberg LLP, wrote in an email to High Times. “The focus now is on the omnibus appropriations bill, which congress is currently negotiating. SAFE has growing support on both sides of the aisle and I, and many others in the industry close to this issue, think that there is a still a chance that movement can be made on SAFE via the omnibus bill during this session of Congress.”

The SAFE Banking Act is supported by a bipartisan coalition of lawmakers made up primarily of representatives and senators from states that have legalized medical marijuana or adult-use cannabis. The bill passed with overwhelming bipartisan support by a vote of 321-110 in the House last year, and senators from both parties are also in favor of passing the measure.

“The Senator is continuing to work every day to build consensus so we can pass “SAFE Banking” into law this year,” a spokesperson for Montana Republican Senator Steve Daines said in an email on Wednesday.

The senior senator from Montana, Senator Jon Tester, a Democrat, also said he “would like to see it pass this Congress.”

The banking bill is also supported by nearly two dozen governors in states that have liberalized marijuana policy. In a written statement, Conor Cahill, a spokesman for Democratic Colorado Governor Jared Polis, praised the work of Perlmutter and said he expects the legislation to pass this year.

“Governor Polis has long advocated for the passage of the SAFE Banking Act, and has repeatedly called upon Congress to pass this important legislation to protect cannabis-related businesses, support minority, women, and veteran-owned small businesses owners, create jobs, and strengthen public safety in Colorado communities and in the states,” Cahill wrote in a Tuesday email. “We hope and expect to see the final passage of his decade-long effort by the end of the lame-duck session.”

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Federal legislation that would permit financial institutions to provide banking services to legal cannabis businesses has been dropped from a bill designed to foster competition with China, marking the sixth time the cannabis banking provisions have failed to gain the approval of the U.S. Senate after being passed by the House of Representatives.

Known as the Secure and Fair Enforcement (SAFE) Banking Act, the legislation would have permitted banks and other financial institutions to serve companies in the legal cannabis industry. Under current regulations, providing traditional banking services such as loans and payroll, checking and deposit accounts is tightly regulated by the federal government, resulting in few financial institutions agreeing to work with marijuana businesses. Critics note that the current policy forces cannabis companies to operate primarily in cash, leaving the businesses vulnerable to crime.

The SAFE Banking Act was first introduced in Congress by Democratic Rep. Ed Perlmutter of Colorado in 2013. Since then, the House of Representatives has passed the bill six times as either a standalone bill or attached to other legislation. But the measure has failed to gain the approval of the Senate.

Most recently, the House approved provisions of the SAFE Banking Act in February as part of the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength Act of 2022 (America COMPETES Act), a bill to support U.S. manufacturing and improve competitiveness with China. But on Thursday, Punchbowl News reported that the cannabis banking provisions have been dropped from the latest version of the COMPETES Act, which is currently in conference committee with House and Senate lawmakers. The report noted that the SAFE Act language had been dropped at the insistence of Republican negotiators.

“In the wake of the Senate’s inaction, people continue to be killed, businesses continue to be robbed, and employees and business owners in the cannabis industry continue to be excluded from the financial system,” Perlmutter, the lead sponsor of the SAFE Banking Act, said in a statement quoted by The Hill.

Activists and Industry React

After news that the legislation had not been included in the latest version of the COMPETES Act Morgan Fox, the political director for the National Organization for the Reform of Marijuana Laws (NORML), said that it “is mind-boggling that this is now the sixth time that SAFE Banking has been approved by the House but stalled by the Senate.”

“This narrowly tailored, incremental, and necessary legislation has broad bipartisan support in both chambers, and it is incredibly disappointing that politics continue to get in the way of saving lives and helping struggling small businesses disrupt and ultimately replace the underground cannabis market,” Fox said in a statement from the cannabis policy reform advocacy group. “If there is a legislative version of the Twilight Zone, the SAFE Banking Act seems to be stuck in it at this point.”

Some supporters of the legislation including Michael Sassano, CEO and founder of cannabis products manufacturer Somaí Pharmaceuticals, believe that Congress is missing an opportunity to make people who work in the industry safer.

“Congress continually drops the easy play by going for an all-or-nothing strategy,” Sassano writes in an email to High Times. “Avoiding the SAFE banking act only shows that they don’t care about the cannabis industry and the safety of our employees, but rather their pet projects that get embedded in every failed law they try and pass.”

Despite Thursday’s setback, representatives of the regulated weed industry have not given up on the cannabis banking bill, with hopes that lawmakers will add the legislation to an upcoming spending package.

“The support and political will is there to get the SAFE Banking Act across the finish line. We are encouraged by conversations about pairing the bill with other helpful cannabis and criminal justice reforms,” Steven Hawkins, president of the U.S. Cannabis Council, said in a statement. “We look forward to working with our members and allies to help get the job done.”

But Fox noted that the opportunity to pass meaningful federal cannabis reform this year is fading as the nation and the Congress head into the 2022 midterm election season.

“There are still some pathways available to get SAFE Banking approved in the current congressional session, but time is running out,” Fox added. “The Senate should not waste this rare chance for bicameral and bipartisan cooperation that would improve safety and opportunities for hundreds of thousands of people and foster economic development in a majority of states.”

Perlmutter, who in January announced he will not seek reelection this year, vowed to continue working to get the cannabis banking measure passed before he leaves Congress.

“I will continue to push for #SAFEBanking to be included in COMPETES, other legislative vehicles, or for the Senate to finally take up the standalone version of the bill which has been sitting in the Senate for three and a half years,” Perlmutter tweeted on Thursday.

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The U.S. House approved the Secure and Fair Enforcement (SAFE) Banking Act on Thursday in a bipartisan 316-113 vote as part of the latest National Defense Authorization Act, a military spending bill. It’s the fifth time the legislation has been approved in the House as a standalone bill or an amendment as part of larger legislation.

Since statewide cannabis reform has been enacted over the past four decades, cannabis businesses still are not fully tolerated, most evidently in federal restrictions, such as the way banking is restricted.

Representative Ed Perlmutter re-introduced the bill, as promised, saying that it would allow cannabis businesses to access the banking system—like any other industry—and would bring more money into the economy and offer the opportunity to create good-paying jobs. 

On September 21, the House Rules Committee approved the SAFE Banking Act as they sifted through over 800 amendments filed for the $778 billion FY2022 National Defense Authorization Act (NDAA) to determine which ones will get a floor vote. As Representative Perlmutter sits in the Rules Committee, the move suggests he has influence.

Currently, The Financial Crimes Enforcement Network (FinCEN) Guidance from the Department of the Treasury provides informal guidance on banking with cannabis businesses, but still nothing to immunize a financial institution from federal prosecution—only an act of Congress can do that.

Bloomberg reported that the SAFE Banking Act would be a boon for cannabis companies—which up until now have been forced to do business in cash thanks to federal banking restrictions. Cannabis-adjacent companies that provide financial services agreed.

“Passage of the SAFE Banking Act is a historic, significant step forward for the cannabis industry, which deserves more legitimacy and access to banking, insurance and other services just like any other mainstream industry. This legislation will open up much-needed access to financial institutions and loans for cannabis industry entrepreneurs,” said Ryan Hale, Chief Sales Officer of Operational Security Solutions (OSS). “Meanwhile, as the sheep dogs for the industry in security, we know that many compliance issues will remain as long as cannabis is still considered a Schedule I drug and passage of the SAFE Banking Act will only mean more regulation for the industry.”

The bill would protect banks that cater to state-licensed cannabis business from facing punishment from federal regulators. As of December 2020, the U.S. Treasury found that 515 banks and 169 credit unions already provide such services.

NORML sent leaders in Congress a letter in support of its inclusion as part of the NDAA. NORML Political Director Justin Strekal applauded the legislation cautiously:

“It is critical to balance the need to accomplish comprehensive reform at the federal level and make every effort possible in the immediate term to support the successful state-level programs to ensure safe and efficient consumer access to quality cannabis that is cost-competitive with the unregulated market,” Strekal said. “For those reasons, we support the inclusion of the SAFE Banking Act in any piece of legislation that is going to be enacted into law.”

Advocates speculated that the SAFE Banking Act might have a better chance of success than a standalone bill, because of its bipartisan support and because Senators don’t want any minor bill holding up the “must-pass” NDAA.

Leaders such as Senate Majority Leader Chuck Schumer and Senator Cory Booker have been somewhat hesitant to support the bill without seeking broader reform. Both see more comprehensive cannabis reform such as the Cannabis Administration and Opportunity Act (CAOA).

“As someone who has been working inside the banking industry for most of my career, I’ve seen firsthand the many challenges banks face when trying to serve cannabis businesses,” said Andrew Montgomery, Founder and CEO of HD Compliance. Montgomery is a seasoned banking professional with more than 25 years as a senior executive in the industry. 

He continued, “Though this is not the first time that lawmakers have added a seemingly unrelated bill to a broader bill that is likely to pass without increased scrutiny, we must remember that the SAFE Banking Act has already been passed four times in the House, two of them were associated with COVID-19 economic relief bills. The Senate failed to act on each of those bills. However, burying it in the Defense Authorization Act may give cover to GOP senators that want to support SAFE Banking and allow Senator Cory Booker to oppose the bill. This very well could be a back door way of passing this needed legislation.”

While some leaders argued about the appropriateness of including the SAFE Banking Act in a military spending bill, veteran support for cannabis is high. NORML, for instance, clarified that the spending bill was indeed an “appropriate vehicle” for cannabis reform. According to the American Legion, nearly one in four veterans currently consumes cannabis for medical reasons.

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