Unlike the MORE Act or CAOA, the SAFE Banking Act does not remove marijuana from CSA’s Schedule I. While the MORE Act and CAOA focus on comprehensive legislation, the SAFE Act is a more modest and more focused piece of legislation, which aims to protect banking institutions—as well as their insurers—that choose to offer services to a legitimate cannabis-related business operating in accordance with its respective state laws. The bill generally offers protection from penalties of a federal banking regulator against a depository institution for offering services to cannabis-related businesses. Transactions involving activities with a legitimate cannabis-related business would no longer be considered as generating proceeds from unlawful activities, and depository institutions would no longer be liable or subject to any federal law or regulation for providing services to the cannabis industry.
Schedule I Classification
Removing marijuana from the CSA’s list of dangerous “drugs with no currently accepted medical use and a high potential for abuse” would almost certainly lead to an exponential increase of commerce in the cannabis space. It would allow depository institutions to take deposits from cannabis-related businesses, allow payment processors and credit card companies to engage in marijuana-related transactions, encourage the development of more reliable insurance coverage for cannabis-related businesses, and permit financial institutions to more easily loan money—including loans secured by marijuana intellectual property, lines of credit, agricultural loans, and most other commercial lending products available to growers, processors, manufacturers, and retailers of more traditional products—to marijuana-related businesses. Consumers would also benefit from a predictable, safe, and enforceable payment system. That is all to say nothing of the cascading effects such legalization would have on job creation, tax collections, and public health as the black market is (perhaps slowly) replaced with regulated commercial activity.
The Political Horizon
It is not clear whether Sen. Schumer has the votes necessary to carry the CAOA through the Senate; at least one or two Democratic votes against passage (based on the breadth and scope of the legislation, as well as taxation and disposition of funds in “equitable” ways) are likely, and might be enough to offset the handful of Republican Senators who may vote for passage.
While passage of the MORE Act or CAOA in the Senate before the November general election is uncertain, the Senate does appear to have enough votes to pass the SAFE Act, due to strong support throughout the financial services industry and on both sides of the aisle. One potential issue with the SAFE Act—at least for lenders—is that while it expressly permits depository institutions to accept deposits from marijuana-related businesses, it does not necessarily cure some of the problems that limit commercial lending activity. For example, it does not carve marijuana out of the CSA’s list of dangerous drugs. This circumstance means, among other things, that bankruptcy protection will remain unavailable to marijuana-related borrowers. Mastering fifty state law alternatives to a debtor’s bankruptcy might therefore weigh against a lender’s decision to enter into a national market.
That said, the cannabis industry itself, along with the finance industry and powerful corporate interests (such as retailer Amazon) have lined up behind the SAFE Act. The consensus seems that industry does not wish a search for the perfect solution (i.e., full-scale decriminalization and regulation) to get in the way of the good (i.e., allowing a fuller range of financial services for marijuana-related businesses). While passage of the SAFE Act seems increasingly likely as a middle ground between current policy and the aims of the MORE Act and CAOA, Congress may still iron out some of the defective limitations in the SAFE Act through the reconciliation process.