SAFE Banking Act Update 2024

This isn’t the first time the SAFE Banking Act has made headlines.

First written in 2017, the SAFE Act has been reintroduced to Congress five times. The latest version of the bill passed in the House in April 2021 but stalled out in the Senate. Earlier versions of the bill have met the same fate — an ongoing frustration for people in the cannabis industry.

Cannabis’ ongoing status as a Schedule I substance severely impacts a plant-touching or ancillary business’ ability to bank and control its finances. Even where cannabis is legal at a state level, businesses must still report to the federal government and IRA. This disconnect between state and federal laws causes many banking institutions to be wary of cannabis or avoid the industry altogether. A common refrain we hear from our clients is the challenges involved in finding a bank that is willing to openly do business with a cannabis company.

Passing the SAFE Act would “prohibit regulators from terminating or limiting either deposit or share insurance of such a financial institution for the sole reason that it does business with a cannabis company.” It would also “prohibit regulators from barring such institutions from offering financial services to these companies and stop regulators from encouraging financial institutions to not do business with those companies.”

That’s a lot of government jargon to simply say the SAFE Act wouldn’t allow financial institutions such as banks and credit card companies to refuse to do business with a cannabis company, as they currently can. Wouldn’t that be a relief!

Without federal regulations for banking and finances, cannabis companies are left to face a “wild west” style market, where risks abound.

• Many cannabis companies operate with a cash-only business model. This is incredibly risky for a company doing thousands or hundreds of thousands of dollars in business, leaving the door open for theft, fraud, laundering, and other crimes.
• Banks can and do refuse to work with cannabis companies, closing the door on access to safe cash storage, accumulating interest, building your businesses’ credit score, and having a trusted financial partner in your community.
• Insurance, credit card companies, and accounting services are also hard to come by. Without legitimate access to banks, many other insurance companies are wary of working within the cannabis industry.
• Funding for new cannabis businesses is hard to come by. While investments are steadily rising year over year, safe access to banks would further increase the financial equitability of this industry.

So what exactly would the passage of the SAFE Banking Act change? Great question. In short, cannabis companies could operate with safer financial practices.

Here’s what that would look like.

• SAFE helps eliminate the risks accompanying a cash-only model. Cannabis businesses would be able to accept debit and credit cards, deposit money into a safe place, and dramatically reduce the amount of cash kept on hand (as well as the dangers that come with storing and transporting it.)
• SAFE prohibits federal regulators from penalizing banks serving legitimate cannabis businesses, opening the door for federal and local banks to service the industry.
• SAFE allows legitimate cannabis businesses access to essential financial services, such as checking and savings accounts. No other industry has to operate without dependable access to these accounts.
• SAFE makes it easier for legitimate businesses to accept alternate payment methods, like credit or debit cards. Currently, most cannabis businesses only accept cash and often have an ATM on site. Not only is accepting credit cards safer than all cash but offering alternative payment methods can expand your potential customer base.

A lack of federal guidelines can leave many cannabis entrepreneurs feeling lost. But there are actionable steps you can take today to protect your business (and your family). Working with a company like AlphaRoot that understands the nuances of the cannabis industry makes all the difference.

Having insurance isn’t a fail-safe against things going wrong— it’s a safety net for when they do. While the exact insurance coverage you need changes by vertical, there are several recommended policies for every canna-business.

• General liability: Protects cannabis companies against basic business risks.
• Crime: Protects your cannabis company against specific money theft crimes
• Property: Reimburses cannabis companies for direct property losses
• Product liability: Protects against claims alleging your product or service caused injury or damage
• Professional liability: Protects cannabis companies against lawsuits of inferior work or service
• Cyber liability: Protects your cannabis company against damages from specific electronic activities

In the ever-changing legal landscape cannabis companies face daily, we expect nothing less than more changes— it’s just a question of when.

The SAFE Banking Act has been a hot topic for several years, and while some professionals have stopped sitting on the edge of their seats, we’re still keeping a close eye on further developments. Basically, we can’t say what’s next— only the Senate can answer that question. And until they take further action, the SAFE Banking Act is in a holding pattern.

Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by emailing [email protected] or calling 646-854-1093 for a customized letter of commitment or learning more about your cannabis insurance options.