The notion that cannabis may cure, treat or prevent COVID-19 makes some people roll their eyes. But the scientific uses of the cannabis plant do not surprise those of us who’ve worked in this industry for many years. And the scientific community appears to be gathering data supporting the notion that cannabis may be beneficial in preventing COVID-19.  

Senate Majority Leader Mitch McConnell falls within the category of people who classify cannabis as therapeutic, if not preventative, for COVID-19. In fact, on August 10, 2020, Sen. McConnell and House Majority Leader Nancy Pelosi did what modern day politicians do – engage in less-than-informed Twitter wars. This came against the backdrop of Congress attempting to find a consensus on its second round of federal Coronavirus relief. This too has become a hyper-politicized issue as one would imagine in these hyper-partisan times.  The Democrats want to reintroduce tenets of the failed Secure and Fair Enforcement (SAFE) Banking Act into the newest round of Coronavirus legislation — under the guise that it’s related to cannabis as a COVID-19 therapy. According to the bill, "[t]he purpose … is to increase public safety by ensuring access to financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such businesses." 

The SAFE Banking Act is filled with hopeful possibilities. Simply put, the U.S. needs the SAFE Banking Act, the global cannabis industry needs the SAFE Banking Act, and our post-COVID economy needs the SAFE Banking Act.  

Without banks, state-compliant cannabis businesses can't accept credit cards, acquire loans, set up deposit accounts, write checks, run payroll or pay taxes. All this currently enables money-laundering, presents a safety hazard, and prohibits the U.S. from keeping pace with nearly all of its neighbors in the Western Hemisphere in the new commercial global cannabis economy.   

The cannabis industry remains unbanked - for six years now -  and the government is at fault. 

Nearly a decade ago, I worked on banking legislation in Colorado aimed at ensuring the cannabis industry had access to at least deposit institutions and the federal payment system, i.e., credit card merchant processing. Because of worried bankers, these efforts failed.   

I cannot overstate how critical it is for us to understand the national picture in this regard, as our law firm represents the largest banking providers to the U.S. cannabis industry. We’ve also worked with various international governments in an effort to solve international banking issues. Even though there’s been tremendous progress, banking the cannabis industry remains a very large and restricting problem — even for 100% federally-legal industrial hemp businesses.

In the uncertain times we find ourselves living through, it’s never been more apparent that we need government to recognize the economic value of the cannabis industry. The SAFE Banking Act is the first step. It provides that federal regulators shall not interfere in the actions of a depository institution dealing with state-legal cannabis businesses. It protects financial institutions that choose to do business with cannabis companies in legal states and provides clarity so that federal regulators cannot interfere with or punish financial institutions for working with legitimate cannabis-related businesses.

This legislation intends to address the gap between a cannabis company’s legal standing in particular states and the current federal prohibition of marijuana sales and usage, as it relates to banking. There are obvious problems in restricting banking access to legal cannabis companies, which causes them to work with a tremendous amount of cash. 

As the legal landscape currently stands, everybody is at risk. For banks, working with legal cannabis companies either raises severe compliance regulations or makes them vulnerable to federal punishment. While cannabis companies struggle to obtain the loans necessary to grow their businesses or launch new ones.

After reaching a dead-end in the Senate last December, the SAFE Banking Act remained stagnant for several months — until Democrats added it to the first round of the Coronavirus relief package. Now it’s returned and its passage is crucial because marijuana's classification as a Schedule I drug under federal law leaves most financial institutions reticent to open bank accounts for cannabis businesses.  

Prominent trade groups, such as the Credit Union National Association, the American Bankers Association, the Independent Community Bankers of America, and the National Association of State Treasurers are all proponents of the SAFE Banking Act. Republicans, on the other hand, are either wary or unsupportive.  

The inability to reach an agreement in Congress on the latest pandemic relief package caused President Trump to issue executive orders, which included: a temporary extension of unemployment benefits, a freeze on evictions, and deferrals of payroll taxes and federal student loans. The SAFE Banking Act would further ensure that it will be easier to track revenues for taxation and regulatory compliance purposes, as well as providing the proper backing of large scale capital from across the nation.

Make no mistake, the cannabis industry is here to stay and continues to grow exponentially. It’s now global in scope, with dozens of nations embracing lawful commercial cannabis. I do not anticipate that our federal government will legalize marijuana anytime soon and I’m not even sure that’s necessary.  

To the extent that it is, the SAFE Banking Act solves this conflict by expressly allowing for cannabis companies to bank cannabis revenues. Further, it allows the industry to become exposed to other banking services which to date have been unavailable – lending, lines of credit, and other investment-related tools. More importantly, it can open the door for large-scale institutional banks to evaluate the process for underwriting and servicing publicly-traded cannabis companies on the NASDAQ and NYSE.   

Cannabis industry infrastructure is extremely costly. Because of the cost of compliance and the implications of tax code 280e, margins are slim. Public market cash would have a tremendous impact. With it, Canadian markets have been able to channel billions of dollars into the commercial cannabis marketplace over the past several years — in a country roughly the size of California and with no true industry infrastructure. Imagine what the U.S. market could do if the floodgates were opened. Not to mention that the absence of federal legislation protecting banks doing business with cannabis companies is adversely affecting other companies and industries as well.

While the Canadian-funded marketplace has outkicked its coverage, it remains a powerful example of what this industry can be with institutionalized capital backing. The opening of the NASDAQ and the NYSE to cannabis companies would necessarily flow from this first step. Even if the SAFE Banking Act becomes law, the full integration between the cannabis industry and the banking industry will take years. We need to start now to keep up with the progressive steps being taken in the European Union, Brazil, Mexico, Israel, and Canada.  

Opening the American banking system will ensure lawful jobs and allow these “essential” businesses to compete in this emerging international industry. At the heart of all this is that the U.S. needs to be a central figure in the global cannabis marketplace. A failure to seize this opportunity, based on spite or the inability to truly grasp the opportunity before us, will be deleterious to our economy. We cannot let that happen — again.