Those that acutely follow the cannabis industry and the path to legalization in various states know that the 2020 election was another watershed event for the industry. Among other things, the following occurred:
|Arizona||Recreational Proposition 207||Passed with over 59% voter approval|
|Mississippi||Medical Initiative 65||Passed with over 74% voter approval|
|Montana||Recreational Initiative 190||Passed with over 56% voter approval|
|New Jersey||Question 1||Passed with almost 70% voter approval|
|South Dakota||Medical Measure 26||Passed with over 54% voter approval|
|South Dakota||Adult-Use Amendment A||Passed with almost 70% voter approval|
This means that 6 GOP Senators saw the addition or expansion of cannabis in their home states. The implication of this is that those Senators may lean in on the issue of cannabis “safe banking” as it is in the interest of their states and constituencies. Currently there is the Secure and Fair Enforcement (SAFE) Banking Act that is awaiting committee and floor votes in the Senate. While many believe that the bill has enough votes in the current GOP-controlled Senate, Senator Mike Crapo, Chairman of the Senate Banking Committee, has declined so far to bring the bill to a vote in his committee, which is necessary to make it eligible to bring to the Senate floor for a vote (27 GOP Senators now have some form of legalization in their home states). The SAFE Banking Act has already passed in the House of Representatives twice (three times if you include the last House’s COVID-19 relief proposal).
However, the stalemate may be changing in the new Senate. Of course, there is the chance that the balance of power shifts in 2021 in the unlikely event that the two Georgia races are decided in favor of the Democrats-in that case, almost certainly “Safe Banking” would pass in the first half of 2021. Beyond that, the Senate Banking Committee is likely to be chaired by Pat Toomey of Pennsylvania rather than Mike Crapo. Senator Toomey has said that he is sympathetic to the need for cannabis safe banking (cannabis is legal medically in Pennsylvania).
Another contributing factor is that 34 bipartisan State Attorney Generals and 16 State Treasurers are urging Congress to act. For the Attorney Generals the primary issue is enforcement of the laws and assistance in reduction of the flourishing illegal cannabis business. The assumption is that by bringing the legal and compliant cannabis industry into the banking system and having them operate as a typical commercial business makes it easier to identify and crack down on the illegal businesses that will be forced to continue operating in all cash. And for the State Treasurers, who are contending with significant COVID-19-related budget shortfalls, driving cannabis consumption revenues from illegal providers to legal providers means more tax revenue.
Finally, while Vice President Biden personally is not an ardent supporter of the legalization of cannabis, it can be anticipated that his administration will be at the very least supportive of decriminalization and safe banking for cannabis. This means, given the enforcement and additional tax revenue concerns being pressed to bipartisan Senators, that the administration is more likely to strike a bargain on “SAFE Banking” with whomever is in leadership in the Senate.
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We would be happy to meet with you to understand your objectives and risk appetite and share our view of the best practices involved in establishing a safe and profitable cannabis banking program. Let us give you a tour of our data portal and demonstrate what a risk-focused and profitable cannabis banking program could like for your financial institution. At HDCS, one of the many things that separates us from our competitors is that we have an affordable solution for vetting your cannabis customers created by bankers for bankers.