On Monday, April 19, 2021, the U.S. House of Representatives approved legislation known as the SAFE Banking Act, which would allow FDIC-backed banks to provide financial lending services to cannabis companies and entrepreneurs that operate in states where cannabis has been legalized. Per this bill, all proceeds from legitimate cannabis businesses will be considered legal. Federal regulators will craft rules to supervise all cannabis-related banking activity.
Currently, it is illegal for FDIC-backed banks to do business with cannabis companies as federal law still considers cannabis a controlled substance. Consequently, prospective cannabis entrepreneurs and companies have very few options to finance their endeavors. Either they had to be flush with cash, or they were limited to seeking financing through "cloud banks" which are online lenders that are not backed by the FDIC; the risks of which are obvious.
Ultimately, this bill would foster much greater access to start-up capital for smaller companies and those otherwise-qualified applicants in the cannabis space who simply cannot afford to submit a competitive application for a permit due to the rigorous financial requirements. This bill would further the public policy goals of many states' laws which seek to promote diversity and inclusion in the cannabis community.
While the bill will undoubtedly have a more difficult time of passing through the Senate to become law, the movement to legalize cannabis at the federal level has undoubtedly been put into sharp focus by Congress. This coincides with efforts at the state level where thirty-six (36) states have legalized medical cannabis and seventeen (17) states allow adult use. So, we view this not as a matter of "if" but a matter of "when," and that is a massive achievement whether the bill is approved by the Senate now or in the relatively near future.
If you have any questions or are interested in engaging the Firm to represent you in the cannabis space, please contact the Chair of the Firm's Cannabis Department, Frank Leddy at email@example.com or Dwight Mitchell, Jr. at firstname.lastname@example.org.