The SAFE Banking Act


The Secure and Fair Enforcement Banking Act (SAFE) of 2019 creates “protections for depository institutions that provide financial services to cannabis-related legitimate businesses and services providers for such businesses, and for other purposes” (S. 1200 – 116th Congress). In combination with the Department of Health and Human Services (HHS) recommendation to reschedule cannabis from a Schedule I to a Schedule III drug, it seems as though change at the federal level is gaining momentum.

What does this mean? Nothing yet, frankly. But what it might mean is the question to think about.

If SAFE passes, that will mean that hundreds of state-licensed and regulated businesses will gain access to the mainstream banking industry. They will be able to accept credit cards, make deposits in banks like every other business, obtain loans, write checks for payroll, and pay taxes like a normal business. SAFE essentially prevents federal regulators from punishing depository institutions just because they operate in the state-legal cannabis market.

Currently, if a banking client owns hundreds of rental properties and rents one of them to a cannabis adjacent business, it puts the bank at risk and causes the bank to terminate the client relationship. SAFE puts an end to the untenable and punitive consequences of doing business in a manner that is legal within the state of operation.

The HHS recommendation will also be an incredibly important, if misunderstood, change. The reclassification to a Schedule III substance means the federal government recognizes that cannabis has medical value. This does not mean, however, that cannabis is all of a sudden untethered.

For instance, state-legal cannabis programs will still be outside of the federal system, which means that it does not eliminate the borders between states. Interstate commerce is still prohibited and the consolidation of varying cannabis interests is still hindered.

Also, federal rescheduling will not immediately crush state medical programs. It takes years of research and development to bring new drugs to market and state medical markets will have time to plan for changes.

In combination, these two changes to federal illegality provide, for the first time ever, bankruptcy protection, along with offering the potential for banks and others to invest in, lease to, and generally participate in the cannabis market—All of these things are unavailable today. With SAFE and the HHS recommendation for rescheduling, the market should see a number of new players and investments, and likely increased M&A activity within state-legal programs.


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