SAFE Banking Act Fails for the Third Time – Cannabis | Weed | Marijuana
Proponents weren’t aiming for a hat trick, but that’s precisely what they got when the SAFE Banking Act failed a third time in the US Senate.
The SAFE Banking Act is legislation that aims to provide a framework for regulating financial institutions serving the cannabis industry.
Currently, most financial institutions are hesitant to work with cannabis-related businesses due to the federal prohibition of cannabis and the risk of prosecution. This has led to a situation where many cannabis businesses cannot access basic banking services, such as checking accounts and loans.
The SAFE Banking Act would provide a safe harbour for financial institutions that serve the cannabis industry, protecting them from federal prosecution and allowing them to offer services to cannabis businesses without fear of legal repercussions.
The act would also provide a framework for regulating these financial institutions, including requirements for compliance with anti-money laundering laws and other financial regulations.
This is the third time the SAFE Banking Act has failed to pass the Senate. The failure caused cannabis stocks to drop.
37 Legal States & No Official Banking
Despite cannabis being legal in 37 states, it remains illegal at the federal level. Due to this, getting banking services as a cannabis company is more challenging than convincing a CNN-watching progressive that George W. Bush was an objectively worse president than Donald Trump.
The SAFE Banking Act has been introduced in various forms in the United States Congress but has never been enacted into law. It has received support from a number of lawmakers and advocacy groups. But it has also faced opposition from some quarters. Including law enforcement groups, busy-body public health bureaucrats, and members of Congress who are in bed with pharmaceutical companies.
Banks and other financial institutions that defy federal laws could see themselves charged with money laundering. Which ranges from fines and penalties to jail time. Given the risks, most simply keep an arm’s length from any cannabis-related business.
How the SAFE Banking Act Fixes Cannabis Banking
Jason Wilson, ETFMG Cannabis Research and Banking Expert, is hopeful. If the SAFE Banking Act can’t pass, at least the Biden administration could do something at the federal level.
“Assuming the Biden administration’s review of cannabis results in rescheduling to Schedule III or higher under the CSA, the issues surrounding 280E and deductibility of business expenses would be resolved,” says Wilson.
Section 280E of the Internal Revenue Code states that legal cannabis businesses cannot take their gross income and deduct operating expenses to arrive at their net income.
This is how typical businesses work. But the IRS makes cannabis businesses pay tax on gross income. Which is often triple what they would pay if the government taxed their net income, like any other business.
It’s unfortunate the SAFE Banking Act didn’t pass. As this “would materially increase the earnings quality of many cannabis companies operating in the US. As well as bring new investors to the table,” says Wilson.
Stocks Fall on News of Third SAFE Banking Failure
Cannabis stocks fell dramatically on the news that the SAFE Banking Act has failed for the third time. AdvisorShares Pure US Cannabis ETF lost 18.1%, and the AdvisorShares Pure Cannabis ETF fell 7.9% by Monday’s close.
Cresco Labs lost 17.6%, Green Thumb was down 12.1%, Tilray was down 8.6%, and Canopy Growth lost 7.3%.
Since Monday, they’ve fallen even further. Cresco Labs is down -25.6%, Green Thumb -25.28%, Tilray -19.6% and Canopy Growth -17.44%.
Many were hoping that December was going to be a productive month for the cannabis industry. However, we’ll have to wait until 2023 before the Senate approves any reforms.
But how likely is it we’ll see cannabis reform in 2023? Many expected this would be the year the SAFE Banking Act would pass.
With a coming recession inevitable, whether SAFE Banking takes priority in an economic downturn is an open question.