Marijuana businesses in most markets have succeeded in no small part to being intrepid – finding effective ways to handle and manage finances without the advantages of federally insured banking options that every other retailer enjoys. Congress removed the SAFE Banking Act from an omnibus defense spending bill. Cannabis supporters and business leaders are concerned this signals a death blow for federal reform. The SAFE Banking Act held the keys to the U.S. financial system for marijuana companies that sell their cannabis supplies mainly through cash dealings.
Despite this latest challenge, there are two major indicators that the financial outlook for the cannabis industry should be strong enough to survive. Notably, the number of depository institutions in the U.S. that are actively banking marijuana-related businesses has remained relatively steady – around 700 for several consecutive quarters throughout 2020 and 2021.
Secondly, according to data from Viridian Capital Advisors, debt financing has consistently accounted for more than 50% of the amount raised by cannabis firms this year. Debt isn’t cheap, but it’s more readily available than it’s been in the past, and that’s crucial for giving more companies increased access to capital. But, too much debt financing can lead to trouble: the potential of losing control of your company and your legacy.
Still, the decision has many pro-cannabis politicians and cannabis industry leaders concerned about the future of federal legalization or decriminalization. Both U.S. Cannabis Council CEO Hawkins and Colorado Representative Ed Perlmutter noted solid bipartisan support for SAFE Banking. Hawkins said in a statement; he was “disappointed” that Congress removed SAFE Banking from the bill.
“We see the consequences every day of the lack of banking access, from the rash of dispensary robberies to the ongoing challenges of minority and small business owners to secure capital,” said Hawkins.
Rep. Perlmutter wrote in a statement after the panel’s decision, “The Senate insists on burying its head in the sand and denies every opportunity to reform our outdated cannabis laws to align state and federal law to improve public safety. My work on this bill is far from over. I plan to pursue every possible avenue to get SAFE Banking signed into law.”
Before this most recent setback, SAFE Banking had its share of critics. Democratic Sen. Cory Booker has opposed passing SAFE Banking before a broader legalization bill such as the Cannabis Administration and Opportunity Act. The concern is that the cannabis industry provides an opportunity to make huge strides toward equity and social justice before opening the floodgates to more extensive corporate interests.
In a press release earlier this month, the Drug Policy Alliance wrote, “By slipping SAFE into the Defense Authorization bill ahead of moving the MORE Act, Congress is sending a clear message that the industry and huge multi-state operators take precedent before the countless people that have had their lives devastated by punitive and racially-motivated drug policies.”
The House has approved the MORE Act multiple times, but the Senate has ignored it.