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US Economy Needs Cannabis Banking Bill More Than Ever

By Aaron Smith · January 12, 2021, 12:48 PM EST

 Aaron Smith
Aaron Smith
As job losses piled up and businesses shuttered their doors in the early days of the COVID-19 pandemic, many scrambled to apply for the federal Paycheck Protection Program,[1] restructured their workforce, and transitioned to retail models that prioritized consumer safety above all.

To say the economy took a downturn is an understatement — and we'll likely feel the effects for years to come.

In a certain sense, cannabis businesses were some of the few to stay afloat amid the chaos, posting record sales last spring,[2] but there was a catch: Though licensed cannabis retailers were deemed essential businesses on par with grocery stores and health care providers, they were excluded from PPP.

Similarly, a vast majority of cannabis businesses and even many ancillary businesses are excluded from banking, loans and other standard financial services. Why? Because of antiquated federal laws.

Now that the United Nations' Commission on Narcotic Drugs has voted to remove cannabis for medicinal use[3] from a list of the world's most dangerous drugs, the path to full cannabis legalization is clearer than ever.

This, alongside the U.S. House of Representatives' historic vote to decriminalize cannabis through the Marijuana Opportunity, Reinvestment and Expungement, or MORE, Act,[4] demonstrates federal support for legalization and, at the very least, should indicate that it's time for financial reform in the cannabis industry.

There's a bill intended to change financial laws surrounding cannabis called the Secure and Fair Enforcement, or SAFE, Banking Act,[5] which the House passed in September 2019 but has since languished in the U.S. Senate.

In May 2020, the House included the SAFE Banking Act language as part of its HEROES Act,[6] a second COVID-19 relief bill, and then again in another stimulus package approved in October. Unfortunately, the SAFE Banking Act was not included in the bipartisan, bicameral omnibus COVID-19 relief deal passed by Congress in December 2020. However, it's likely that discussions surrounding passing the act will resume in 2021 in both subsequent pandemic relief and stand-alone legislation.  

Beyond the implications for everyday Americans, as well as businesses of all shapes and sizes, cannabis businesses especially are left with few places to turn amid this sustained crisis. With no federal action, cannabis businesses that help support local economies, employ hundreds of thousands, and provide an essential service could soon be forced out of business.

The time is now to act — or this growing sector is sure to face debilitating setbacks.

Decriminalization and Legalization Are on the Horizon

Despite what the federal government's actions may imply, the truth is, the majority of Americans support not just decriminalization of cannabis but full legalization.[7] And now that four more states have legalized cannabis for adult use — including the deep red states of Montana and South Dakota — there is more pressure than ever to reform our outdated federal marijuana laws.

According to Politico, as a result of 2020 ballot initiatives,[8] 1 in 3 Americans now lives in a state that has legalized cannabis for adult use. Cannabis is here to stay.

Denying this critical industry access to the same basic financial tools — such as bank accounts, loans and cashless payment systems — that are afforded to mainstream businesses is to seriously hobble small businesses, local economies and entrepreneurs.

Small Business Sense for Essential Businesses

Essential businesses should be supported at the very least like any other legal business. Simple, right? Not so much.

American entrepreneurs and business owners turn to business loans to grow their operations, hire more people, expand their offerings or any number of other initiatives. But the entire ecosystem of cannabis businesses — not just plant-touching enterprises — are often excluded from valuable loans, stymying growth and turning would-be cannabis entrepreneurs away from the industry.

But why the exclusion? It all comes back to cannabis's classification as a Schedule I controlled substance.[9] Depository institutions, such as banks and credit unions that work with cannabis-related legitimate businesses, face the risk of backlash by federal regulators.[10] To many financial institutions, it is simply not worth the risk to engage with cannabis-related legitimate businesses — even with the House passing the MORE Act.

The effect is profound: Legal cannabis is the only essential business excluded from mainstream banking.

What's more, consumer behavior all but necessitates contactless payment options. Pandemic-era consumers are most interested in efficiency, contactless checkout and safe in-store operations,[11] according to research published in October by business services provider McKinsey & Co. Inc.

The SAFE Banking Act would mean opening up access to contactless payment options, elevating health and safety across the cannabis industry.

Cannabis and Taxes

The pandemic upended our everyday lives, evaporated tourism economies and dried up tax revenue from the restaurant sector. State and local governments now find themselves severely compromised; when the economy contracted and those tax dollars vanished, they also saw rising costs associated with COVID-19-related safety measures and surging unemployment.

Cannabis businesses generate billions of dollars in tax revenue, but because of lack of access to banking services, they're forced to pay their taxes and many other expenses such as payroll in cash — an inconsistent and potentially dangerous prospect.[12]

With a potential federal tax revenue of $132 billion by 2028[13] in the event of national legalization, cannabis businesses are major economic drivers and help support state and local economies. In some states, like Colorado, tax revenue from cannabis-related businesses already exceeds tax revenues from alcohol sales.[14]

Among so many other benefits, the passage of the SAFE Banking Act would remove the cumbersome burden of cash-only transactions by allowing cannabis dispensaries to accept cards as a form of payment rather than relying on cash-only models. Translation? Quicker infusions of large amounts of tax revenues into cash-strapped local and state governments.

A Smart, Necessary Move

Support for the SAFE Banking Act is unusually bipartisan. Nearly three-quarters of U.S. senators represent states deeply affected by our outdated federal banking policies, and the bill was approved by the House of Representatives by a stunning 321-103 vote, including nearly 100 Republicans, over a year ago.

For now, we'll have to set our sights on reform in 2021 — and with a Democratic-led Senate, chances are good that the SAFE Banking Act will enjoy renewed attention in the upcoming session.

Cannabis-related businesses are helping generate much-needed tax revenue during the pandemic and also kept people employed — it's a vital industry, and it's time the playing field is leveled by providing cannabis businesses with the same banking services that benefit every other industry.



Aaron Smith is co-founder and CEO of the National Cannabis Industry Association.

Disclosure: The NCIA participates in lobbying efforts for the MORE Act and the SAFE Banking Act, but was not directly involved in drafting the legislative language.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the organization or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


[1] U.S. Small Business Administration. (n.d.). Paycheck Protection Program. U.S. Small Business Administration. Retrieved December 11, 2020, from https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program.

[2] Marijuana Business Daily. (2020, August 13). Colorado's $158M in June recreational cannabis sales sets mark amid COVID. Marijuana Business Daily News Brief. Retrieved December 9, 2020, from https://mjbizdaily.com/colorados-158-million-in-june-recreational-cannabis-sales-sets-record/.

[3] Kwai, I. (2020, December 2). U.N. Reclassifies Cannabis as a Less Dangerous Drug. The New York Times. Retrieved December 8, 2020, from https://www.nytimes.com/2020/12/02/world/europe/cannabis-united-nations-drug-policy.html.

[4] Fertig, N. (2020, December 4). Politico: House votes to legalize weed. MSN.com. Retrieved December 8, 2020, from https://www.msn.com/en-us/news/politics/house-votes-to-legalize-weed/ar-BB1bDJo2.

[5] Congress.gov. (2019, March 7). H.R.1595 - Secure And Fair Enforcement Banking Act of 2019. Retrieved December 8, 2020, from https://www.congress.gov/bill/116th-congress/house-bill/1595/text.

[6] Congress.gov. (2020, May 12). H.R.6800 - The Heroes Act. Retrieved December 8, 2020, from https://www.congress.gov/bill/116th-congress/house-bill/6800.

[7] Daniller, A. (2019, November 14). Two-thirds of Americans support marijuana legalization. Pew Research Center. Retrieved December 8, 2020, from https://www.pewresearch.org/fact-tank/2019/11/14/americans-support-marijuana-legalization/.

[8] Fertig, N., & Zhang, M. (2020, April 11). 1 in 3 Americans now lives in a state where recreational marijuana is legal. Politico. Retrieved December 8, 2020, from https://www.politico.com/news/2020/11/04/1-in-3-americans-lives-where-recreational-marijuana-legal-434004.

[9] United States Drug Enforcement Administration. (n.d.). Drug Scheduling. DEA.gov. Retrieved December 8, 2020, from https://www.dea.gov/drug-scheduling.

[10] Stewart, I. A., & Wilson Elser Moskowitz Edelman & Dicker LLP. (2019, June 11). United States: An Expert Analysis Of The SAFE Banking Act. Mondaq. Retrieved December 8, 2020, from https://www.mondaq.com/unitedstates/financial-services/813756/an-expert-analysis-of-the-safe-banking-act.

[11] McKinsey & Company. (2020, December 8). Survey: US consumer sentiment during the coronavirus crisis. Retrieved December 8, 2020, from https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/survey-us-consumer-sentiment-during-the-coronavirus-crisis.

[12] Smith, A. (2018, January 18). IRS collects billions in pot taxes, much of it in cash. CNN Business. Retrieved December 8, 2020, from https://money.cnn.com/2018/01/18/smallbusiness/marijuana-industry-taxes-irs/index.html.

[13] Zezima, K. (2018, January 10). Study: Legal marijuana could generate more than $132 billion in federal tax revenue and 1 million jobs. The Washington Post. Retrieved December 8, 2020, from https://www.washingtonpost.com/national/2018/01/10/study-legal-marijuana-could-generate-more-than-132-billion-in-federal-tax-revenue-and-1-million-jobs/.

[14] Institute on Taxation and Economic Policy. (2019, January 23). Five Years in, Cannabis Tax Haul Rivals or Exceeds Alcohol Taxes in Many States. Retrieved December 8, 2020, from https://itep.org/five-years-in-cannabis-tax-haul-rivals-or-exceeds-alcohol-taxes-in-many-states/.

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