SAFE Banking Act Would Give Cannabis Companies Access to Financial Services

Shut out of the federal banking system, legitimate cannabis companies are seeking passage of the SAFE Banking Act to free them from getting credit from loan sharks and “vulture capitalists.”

David Belsky, Founder and CEO of Flowerhire, and Sloane Barbour, Chief Revenue Officer described the difficulties cannabis operators face without the services of US banks.

Belsky and Barbour spoke about the House’s passage earlier this month of the Secure and Fair Enforcement (SAFE) Banking Act, which was endorsed by the American Bankers Association.

Belsky, in L.A., and Barbour, in Manhattan, recruit talent for cannabis companies across the nation—including Arizona.

Cannabis not a Red-headed Stepchild

Belsky and Barbour say they have successfully filled jobs in 12 states in the past year.

Still, profits are being compromised by usurious interest rates charged by “vulture capitalists,” Belsky says.

“A profitable medium-sized business that wants to grow should be able to get a line of credit. But that doesn’t happen, so you see vulture capital and loan sharks providing liquidity and loans,” Belsky tells Blog of Arizona.

“Cannabis operators are paying loans whose interest is 300 percent above the average loan of 4 to 6 percent, for a start-up firm.”

Barbour adds, “we’ve been kicked out of banks and haven’t touched the plant.”

Belsky founded Flowerhire in 2017 after eight states legalized medical or recreational cannabis use during the 2016 Presidential election, including California and Massachusetts.

He references a Quinnipiac poll stating that 69 percent of Americans want pot legalization, and the number is climbing annually.

Creating jobs

The industry also creates tens of thousands of jobs, Barbour notes, and legislators—including Joe Biden–should stop treating it like a red-headed stepchild.

“While support for pot legalization has never been higher, banks can be sued for money laundering if they get involved with you,” says Belsky.

If the Senate passes the SAFE Banking Act, it will create a safe harbor for depository institutions, including banks and credit unions.

The banking act directs the Secretary of the Treasury to ensure Financial Crimes Enforcement Network (FinCEN) guidance is consistent with the purpose and intent of the cannabis banking law, facilitating access to commercial banking.

The visibility that banks provide and the reports they’re required to file would curtail crime in the industry.

Bipartisan Backing

The House passed the SAFE Banking Act of 2021 by a decisive majority of 321 to 101 on April 19. In all,106 Republicans and 215 Democrats approved the bill. The banking bill is now in the Senate, where Pennsylvania Republican Pat Toomey supports the legislation.

Toomey serves on the Senate’s Banking, Budget, and Finance Committees, so his support should carry a great deal of weight on his side of the aisle.

Senator Jeff Merkel (D-Oregon) and Cory Gardner (R-Co) reintroduced the legislation earlier this year, along with a new Republican co-sponsor: Steve Daines of Montana.

Sherrod Brown: No Bank Act without Legalization

Senate Banking Committee Chairman Sherrod Brown (D-Oh) opposes passing the Safe Banking Act unless the Marijuana Opportunity Reinvestment and Expungement Act (MORE Act) is passed with it, effectively legalizing pot

Legalization would remove cannabis from the Controlled Substance Act list and enact various criminal and social justice reforms, including the expungement of pot convictions.

President Biden won’t legalize pot, but he might be inclined to endorse a banking bill that would wipe out crime in a burgeoning industry.

“Because the banks can’t do business with us, cannabis companies have been systematically targeted by organized crime,” Belsky says.

“This is affecting 300,000 individuals working in the cannabis industry across the US”

“States like Arizona and Michigan have more cannabis employees than police officers,” notes Barbour.

Arizona Market 

In Arizona, which legalized pot during the 2020 election, the medical market is set up to accommodate most users, Barbour says.

In Arizona, most people have a medical marijuana card and can get home delivery of weed.

Arizona’s rollout was the fastest he’s seen in any state, with 150 dispensaries already operating when recreational pot was legalized on January 1.

Arizona is a billion-dollar market, and recreational pot will drive it higher, Belsky and Barbour said.

When states granted pot “essential business” status during the pandemic, it gained stature,” Belsky says, which might persuade Republicans to vote for the SAFE Banking Act.

Belsky and Barbour say the only action that will truly juice the industry is the end of predatory borrowing rates and access to capital.

New York City

The biggest social experiment in cannabis will be within New York City, as Governor Cuomo finally legalized recreational pot on March 31.

“New York is a city of 8 million people. Entrepreneurs will open cannabis lounges; there will be infused drinks and a social experiment the likes of which we’ve never seen, “Barbour predicts.

When Cuomo was most vulnerable, progressives inserted a social justice piece to the law, Barbour added.

The Green Rush

According to estimates from Arcview Group, BDS Analytics, via their 2019 cannabis markets report, Arizona will top $1.47 billion by 2024, beating out states like Nevada, Washington, and Oregon in profits.

The global cannabis market is predicted to reach $42.7 billion by 2024, according to Arcview Group.