A cannabis banking bill cleared a Senate committee for the first time ever on Wednesday morning.
The Secure and Fair Enforcement Regulation (SAFER) Banking Act provides a safe harbor for legal state-level marijuana dispensaries and growers to access federally-regulated banks and credit unions that have been wary of the persistent federal ban.
Sens. Jeff Merkley (D-Ore.), Steve Daines (R-Mont.), Kyrsten Sinema (I-Ariz.) and Cynthia Lummis (R-Wyo.) and Majority Leader Chuck Schumer (D-N.Y.) introduced the tweaked version of the SAFER Banking Act last week.
Versions of this bill have passed the House seven times, but this is the first time it has advanced in the Senate.
A bipartisan group of senators hustled to reach compromises on key disagreements ahead of the markup, although there was still plenty of discontent on display around criminal justice reform and the Obama-era “Operation Choke Point.”
“It’s been quite a journey,” Senate Banking Committee Chairman Sherrod Brown (D-Ohio) said during his opening remarks.
Committee members voted 14-9 to advance the SAFER Banking Act. Lummis, Daines and Sen. Kevin Cramer (N.D.) were the only Republicans to vote “yes” on the bill.
Sen. Raphael Warnock (D-Ga.) broke with his party, saying he was concerned the bill could increase the racial wealth gap and “just make the comfortable more comfortable.”
“This bill will make life safer for bankers, for businesses and financial institutions, some of whom have been profiting from the cannabis industry illegally for years, which is ironic given many of the regular folks who illegally sold or used cannabis are sitting in jail cells right now,” Warnock said.
Legal cannabis sales are expected to hit $33.6 billion this year, according to an April analysis by MJBiz Factbook. The lion’s share of that total will not go to communities hit hardest by the war on drugs: Less than 5 percent of cannabis business owners are Black, Sen. Elizabeth Warren (D-Mass.) pointed out.
Some small business owners who celebrated the bill’s passage are also pushing to update the definition of financial services to expand access to capital, which they say would be particularly valuable for minority-owned shops.
Reese Xavier, CEO and managing partner of HT23 Growers, told The Hill in a phone interview that he was excited the SAFER Banking Act passed out of committee. But he’s hoping to see the bill provide cannabis companies the same access to loans, mortgages and other services as it does to hemp sellers.
“That then allows us to gain access to the capital that we need to stand up these businesses to really make a difference in communities of color,” Xavier said.
In a statement released after the markup, Schumer said he would bring the SAFER Banking Act to the floor for a vote “as quickly as possible.”
The bill would need 60 votes to clear the Senate, where it faces roadblocks on both sides of the upper chamber.
Several progressive Democrats share Warnock’s concerns about the lack of criminal justice provisions in the act, and many Republicans are wary of doing anything to help the cannabis industry.
Schumer also reiterated his commitment to include criminal justice reforms, namely the Harnessing Opportunities by Pursuing Expungement (HOPE) Act, which would support the expungement of state-level cannabis convictions, and the Gun Rights and Marijuana (GRAM) Act, which would override federal restrictions on the sale of firearms to marijuana users.
An overwhelming majority of states have legalized medical or recreational cannabis use, and laws are rapidly changing across the country. Recreational marijuana legalization is on the ballot this year in Ohio, where the committee chairman faces a tough reelection in 2024.
Although the Department of Health and Human Services recently recommended that marijuana be reclassified from Schedule I to Schedule III, cannabis is still illegal at the federal level. That means these businesses are often denied access to banking services.
“The status quo is simply untenable for consumers, small businesses and banks operating in states where cannabis is legal,” the American Bankers Association said in a statement following the markup.
Despite the House’s leadership on cannabis banking under Democratic control, hang-ups around language protecting the cannabis industry from regulators could also tank the bill in the Republican-controlled chamber.
Some Republicans railed against “Operation Choke Point,” a 2013 Justice Department initiative that discouraged banks from serving businesses at high risk for fraud and money laundering.
The Justice Department formally ended the initiative in 2017, but Republicans remain concerned.
“The bill would give special protections to businesses conducting a federally illicit activity, protections that legal businesses simply do not enjoy,” Sen. Mike Rounds (R-S.D.) said.
“Meanwhile, legal industries such as firearms or traditional fuel sources still must fight to even hold accounts.”
Lummis, one of the bill’s sponsors, said the updated language would prevent federal banking regulators from closing bank accounts for “reputational risk reasons.”
“It takes a major step towards ending the banking industry being weaponized,” Lummis said. “All legal businesses, whether on the right or the left side of the ideological spectrum, should have access to bank accounts.”