Congress Considers Financial Safe Haven for Financial Investment and Expansion in Legal Marijuana Operations
Since the early 1990s, the legalization of marijuana has been a prominent subject in American legislation. (Scott C. Martin, TIME) As public support for legalization has grown, the laws affecting cannabis and marijuana related businesses have been difficult to navigate. (Hilary Sledge-Sarnor, Business Law Today) These difficulties are largely attributed to a number of inconsistencies between federal and state law, which make it increasingly difficult to determine what is legal in regard to marijuana-related activity. (Id.) As of June 25, 2019, thirty-three states and the District of Columbia have passed laws legalizing marijuana, with eleven explicitly regulating marijuana for recreational use. (GOVERNING)
In May of 2017, Senator Jeff Merkley (D-OR) and Representative Ed Perlmutter (D-CO) introduced to Congress the Secure and Fair Enforcement (SAFE) Banking Act. The SAFE Banking Act is designed to reduce the ability of federal banking regulators to intervene in the actions of a depository institution that deals with a legal cannabis business. (Nathan Reiff, Investopedia) The bill was introduced in the House of Representatives in March of 2019 and passed by a vote of 321-103 on September 25, 2019. (Congress.gov) As the SAFE Banking Act moves through the Senate, civil rights advocates believe the focus should first be on comprehensive criminal and social justice reform. (Jeff Smith, Marijuana Business Daily)
The federal government first regulated marijuana when Congress passed the Marijuana Tax Act in 1937. (Scott C. Martin, TIME) Initially, Congress feared far-reaching regulations prohibiting marijuana use would be susceptible to constitutional challenges. (Id.) With that in mind, Congress imposed special occupational taxes upon persons engaged in activities involving marijuana under the Marijuana Tax Act. (Schaffer Library of Drug Policy) Following the Marijuana Tax Act Congressed passed the Boggs Act in 1951, which increased penalties for marijuana related activities. (Schaffer Library of Drug Policy) Soon after, Congress passed the Controlled Substances Act in 1970 largely motivated by President Nixon’s war on drugs. (Lisa Sacco, Congressional Research Service) The Controlled Substances Act labeled marijuana as a schedule I drug, the most restrictive class reserved for drugs with a “high potential for abuse,” “no currently accepted medical use” and a “lack of accepted safety.” (Drug Policy Alliance) In 1972 an investigative body appointed by Nixon, the Shafer Commission, recommend that marijuana be decriminalized and thus removed from Schedule I. (Scott Martin, TIME) Nixon emphatically rejected the commission’s recommendation. (Id.)
As public support for the legalization of marijuana became more wide spread, states began legalizing the use of medical marijuana on the heels of President Reagan’s War on Drugs. In the 1990’s, five states and the District of Columbia passed laws legalizing medical marijuana. (Washington Post) Today, there is more public support for marijuana law reform than ever before, with new polls showing more than half the country is in favor of legalizing marijuana. (Drug Policy Alliance ) Organizations such as the Drug Policy Alliance believe marijuana should be removed from the criminal justice system and regulated like alcohol and tobacco. (Id.) But despite legalization by many states and widespread public support, the use, sale, and distribution of marijuana is still illegal under federal law. (Marijuana Law)
As the legal cannabis industry has exploded, businesses and governments alike race to attempt to regulate and capitalize on the booming market. Advocates of bills such as the SAFE Banking Act are attempting to solidify the legitimacy of legal marijuana transactions amongst federal financial regulators. (Jeff Smith, Marijuana Business Daily) Without federal safe harbors, financial institutions are reluctant to give access to marijuana operations in states where it is legal. As a result, the industry currently deals mostly in cash transactions, which has hindered expansion and presents security and other concerns. (Jeff Smith, Marijuana Business Daily).
The waters surrounding marijuana law have been difficult to navigate. It is especially tricky to determine the legality of the involvement of financial institutions that operate under federal regulatory law. (Jeff Smith, Marijuana Business Daily). As public support for marijuana continues to grow, and the investment opportunities with it, safe havens such as those found in the SAFE Banking Act are likely to become commonplace.