SAFE Banking Act Goes to Senate Floor

September 26, 2019

With the news that the SAFE banking act passed the US House, potentially shielding proper banking practices within the cannabis industry, markets across the country face a whole new set of opportunity costs.

While still unlikely to pass a grid-locked Senate, the House vote signals strong Federal-level consideration. The bill would protect banking practices in the industry, opening avenues to capital and stability long-sought by growers, processors, dispensaries and ancillary servers alike. Venture-capital firms, or other companies holding excess capital, that to-date may have been hesitant to enter agreements within industry, may now be willing to engage with these same players as the risk-reward balance continues to shift.

Access to steady, safe capital would open the industry to further expansion, ease real-estate worries, increase stability in payroll and standardize accounting and tracking practices. As the industry continues its path toward normalization, steps like the SAFE act go a long way in advancing the legitimacy and opportunity of adult-use and medicinal cannabis.

Language based on trigger events, such as a full passage of the SAFE act, are increasingly being written into contracts, mergers, partnerships and legislation, setting up risk tolerance levels that states and companies feel comfortable operating within.

These events are likely to continue. Oregon recently passed legislation allowing for the interstate sale of cannabis products, a move that could solve its supply issues while bringing in additional revenue, though the bill is predicated on the further federal action. TheStrengthening the Tenth Amendment Through Entrusting States (STATES) Act, currently awaiting a house vote, would codify state’s protection from DOJ investigation or prosecution, currently covered by an amendment to the 2020 Fiscal Budget. Continued progress in the form of triggering events presents a drastically different route to market than complete FDA re-scheduling or full Federal legalization, processes that can take years.

Recently, the industry watched Oklahoma roll out a loosely restricted medicinal cannabis program that did little to limit approved medical conditions or licensing for the sale of medicinal products. The boom in interest appeared almost overnight with 6,500 dispensaries (1st in the country on a per capita basis) and the third largest patient count in the country, which jumps to #1 on a per capita basis, all within six months, signifying incredible demand in deeply conservative parts of the country.

While the state legislature struggles to rein in the nascent market, one envisions a time where loose conditions (or Tallahassee’s stated inability to differentiate full THC cannabis from its legal 0.3% THC hemp cousin) and risk-tolerant capitalism open new markets, replacing the painfully slow referendum process or the political quagmire of legalization legislation.