As the midterm elections come to an end, we revisit the future of the SAFE Banking Act and the hurdles we expect to see in the coming Congressional term. If passed, the SAFE Banking Act would remove uncertainties surrounding federally regulated financial institutions, allowing financial institutions to bank the legal cannabis industry with less legal, regulatory, and reputational risk. While marijuana is still classified as a Schedule I drug under the Controlled Substances Act, making possession, growing, transporting, and distributing marijuana a federal felony, many states have legalized some form of the use of marijuana, either for medicinal use, recreational use, or both.
As you may recall, the SAFE Banking Act has had no trouble in the past gaining traction and enough support in the House (passing six times). However, it continues to stall in the Senate – drawing criticism within the Democratic party. On numerous occasions, Sen. Cory Booker (D-N.J.) openly opposed passage of a bill that supports marijuana businesses while failing to help communities hurt by the criminalization of marijuana. Two influential Democrats in the future of the SAFE Banking Act, Senate Majority Leader Chuck Schumer (D-N.Y.) and Senate Banking Chair Sherrod Brown (D-Ohio), support Booker’s stance. And as we previously commented, Schumer prevented a vote in the past in order to attain more comprehensive reform. However, this broader reform, seen in the Harnessing Opportunities by Pursuing Expungement (HOPE) Act, has failed to see any movement since it was first introduced to the House in December 2021.
Entering into the 2022-2023 Congressional term, Democrats will maintain control of the Senate, though its margin hangs in the balance with the Georgia runoff election. Meanwhile, the Republicans flipped the House by gaining seven seats. While it is unlikely that the Georgia runoff will have any significant bearing on the future of the SAFE Banking Act, the specter of a Republican-led House may motivate Senate Democrats to move this legislation during the lame duck session between now and January 2023. If the Democratic party wishes to see any forward progress, the lame duck session appears to be its best opportunity. With that said, forward progress largely depends on cannabis-related legislation that strikes the perfect balance between financial services and criminal justice reform that both Democrats and Republicans can support. Legislation that primarily focuses on banking risks losing support from progressives, whereas legislation too focused on social equity risks losing support from conservatives. While proponents remain optimistic that the lame duck session will result in legislation that combines elements of the SAFE Banking Act and HOPE Act, it is clear that SAFE, on its own, is likely dead in the water.