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SAFE Banking – The Most Crucial Piece of Cannabis Reform Legislation That Needs to Be Passed ASAP

By Skip Motsenbocker, CEO of Pacific Stone

Duffel bags being filled with cash, armed guards and trucks with tinted windows: this isn’t a scene out of the Netflix Series Ozark, but the reality of many licensed cannabis companies throughout the United States. Despite adult-use cannabis being legal in 19 states and Washington, D.C. (not to mention 37 states with a medical cannabis market), countless cannabis companies still do not have access to federal banking, leaving them to resort to paying their bills, employees and even taxes in cash. The reason? Federally insured banks will not typically open accounts for cannabis businesses because they could face criminal liability under federal law, which still classifies cannabis as a Schedule One drug.

To be frank, this quagmire is simply ridiculous. Cannabis is a multi-billion-dollar, global industry. According to BDSA, cannabis sales for 2021 will near $31 billion, an increase of 41% over 2020 sales. Further, BDSA forecasts global cannabis sales to balloon to $62.1 billion by 2026. An industry whose sales have topped markets ranging from paid music streaming services to tequila should not be relegated to dealing in cash. It is not only a major safety issue, but also an issue of legitimacy and limited opportunities (for credit scores and otherwise) for employees, from the C-Suite to budtenders. The lack of banking access also hinders opportunities for disadvantaged communities and small business owners to obtain the capital they need to enter the industry, succeed and grow.

Of course, the Secure and Fair Enforcement Banking Act has been on Congress’ docket since 2019, but in December 2021 the federal government dropped the ball again. The legislation, which would provide cannabis companies and their service providers a safe harbor to the banking industry by prohibiting federal regulators from penalizing financial institutions that open their doors to these companies (among other measures), was recently dropped as a provision within the annual National Defense Authorization Act for Fiscal Year 2022 (NDAA). We were closer than even to getting this bill passed, so this is such a disappointment. The Senate has yet again declined to reform our antiquated, unsafe and illogical cannabis regulations.

There is no good reason to not pass SAFE Banking and any notions against this legislation leave us with more questions than answers. Alarmists and extremists have tried to insist that allowing for legitimate banking would somehow make the licensed industry more vulnerable to illicit operators and cartels, but frankly this is a ludacris argument. In addition, many states including California utilize track and trace systems like Metrc for their cannabis requiring all product to be followed from seed to sale; so why wouldn’t the federal government want to allow banking that enables the dollars involved in cannabis purchases to be traced back to a bank? And what’s with the hypocrisy of sales taxes collected directly attributed to cannabis purchases being able to be deposited into federal banks by government authorities, but the revenue from the remainder of the transactions cannot?

While the SAFE Banking Act did have support across party lines, some members of Congress object to it leading the pack of cannabis reform and being passed on its own and want to push for broader cannabis reform that also includes record expungements for those charged with non-violent, cannabis related offences, another crucial measure to help rectify the injustices of Prohibition. Broader cannabis reform is crucial, but it shouldn’t be at the expense of approving SAFE Banking as soon as possible.Perfect legislation rarely if ever exists, so the attempt at getting it perfect candidly seems to be the detour to getting anything done.

Speaking of broader cannabis reform, while of course federal legalization is the goal, the next step beyond SAFE Banking to ensure legitimacy and safe, fair transactions for cannabis businesses is rescheduling or de-scheduling. Cannabis needs to be removed from the schedule that was created by the Controlled Substances Act in 1971. With cannabis no longer listed as a Schedule One substance, normal and secure banking would also be an undeniable reality, as banks could do business with the cannabis industry. In addition, re- or de-scheduling would allow for the removal of the restrictive 280E tax code, which bars businesses from deducting normal operating expenses from income originating from the sale of Schedule One and Two drugs – a significant hurdle to allowing the industry to be profitable.

We have seen some encouraging news surrounding rescheduling this year. In November 2021, U.S. Rep. Nancy Mace from South Carolina proposed the States Reform Act, which would remove marijuana from the list of federally controlled substances, among other business-friendly reform measures.

But we should not wait around for this new legislation nor put all our eggs in one legislative basket. I urge Congress to do whatever it takes to pass SAFE Banking, as this access has been long overdue. We all strive for the perfect system, but as the cannabis industry booms and inaction becomes theaction of Congress, consumers of a legalized plant that is overwhelmingly supported by the American public are the true victims. The cannabis industry is an economic powerhouse with tremendous growth potential. We are not a vice industry, we are health, medicinal, wellness, food, beverage, social consumption and more. While there are currently banking alternatives for the cannabis industry in the form of banking service companies, this is not a long-term solution. Cannabis deserves access to federal bank accounts, credit lines and all the benefits that come with it like every other licensed, regulated and legitimate industry.



Skip Motsenbocker

Skip Motsenbocker

Skip Motsenbocker is the CEO of Pacific Stone, a market leader in California cannabis, with both large scale green-house cultivation facilities and more than a million square feet of flower. Pacific Stone Brand is offered in over 600 stores and includes packaged flower, pre-rolls and cartridges. Motsenbocker oversees the brand’s product launches, expansion, among other exciting strategic initiatives.


This Post Has 2 Comments
  1. Since at least 2014, there has been no significant federal restriction on cannabis banking. The SAFE banking Act is a solution chasing a non-existent problem. Fincann’s Cannabis Banking Financial Network comprises 220+ federally-insured banks, and can onboard any legitimate company with a transparent, sustainable business checking account and related financial services (e.g. MC/Visa, lending) in any cannabis-industry related business in any industry sector in all 50 states, Short of ending federal cannabis prohibition, eliminating IRS 280E would be more positive, useful and impactful than ‘reforming’ banking.

  2. There is NO provision in the United Nations Single Convention on Narcotic Drugs, to which the USA is a signatory nation. Even if the feds wanted to they could not, under binding international law, legalize nor decriminalize “adult use” (should be “social use”) high (o.o3%) THC cannabis. There IS an internationally-compliant way to provide almost universal access that also opens up banking and, mostly, kills 280-E. We need Congress to amend the CSA by creating Schedule VI, which would include all over the counter drugs, including cannabis. This would meet the international requirements for government control and that it be medical while also providing mechanisms for quality control and safety testing.

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