House signs off on pot banking bill again, but will Senate follow?

WASHINGTON – Lawmakers are once again trying to give the green light to cannabis banking legislation, but analysts say the bill continues to face long odds as Senate Democrats set their sights on a more ambitious goal to decriminalize marijuana.

The House was expected to pass a targeted measure as early as Thursday that would give banks legal cover to serve cannabis firms in states where the substance is legal. The bill, known as the SAFE Banking Act, was added to a must-pass defense authorization without opposition. The defense package is expected to pass the House this week.

But a more difficult road awaits in the Senate, where Democratic leadership hasmobilized behind a broader cannabis legalization and reformpackage. Many in the chamber have opposed incremental reform that only benefits banks and other businesses. A pot banking bill could stall legalization efforts, they say.

“Sometimes in D.C., you think about taking the piecemeal approach, and that makes it easier” to legislate, said Ed Mills, a policy analyst at Raymond James. But some progressive lawmakers increasingly believe that taking a step-by-step approach to cannabis reform could kill the momentum behind more comprehensive efforts.

“Sometimes by solving other people’s problems, you release the pressure on getting the larger package done,” Mills said.

The House approved the amendment by voice vote for the fiscal year 2022 National Defense Authorization Act, moving the industry-supported SAFE Banking Act – sponsored by Rep. Ed Perlmutter, D-Colo. – a step closer to passage.

But it has already passed the House several times since being introduced in 2019, and then met opposition in the Senate.

Supporters say the marijuana banking bill addresses the cannabis industry’s need for legal financial services at a time when many banks are reluctant to serve the sector because of regulatory risks. Many marijuana businesses are known to operate in cash, prompting security concerns.

Perlmutter tweeted on Tuesday that the SAFE Banking Act would “strengthen the security of our financial system & keep bad actors like cartels out.”

“It’s passed the House 5 times. We cannot wait any longer to address this public safety threat,” Perlmutter added.

Bank advocates also welcomed Tuesday’s development. “Lawmakers clearly understand the immediate public safety benefits that would come with ending the conflict between federal and state law in those states where cannabis is legal,” said James Ballentine, executive vice president of congressional relations and political affairs at the American Bankers Association, in a statement.

“We think the strong vote bodes well for final action in the Congress later this year, and we look forward to working with the bill’s sponsors to see this important legislation enacted into law,” Ballentine said.

But others say that political dynamics on Capitol Hill may doom the SAFE Banking Act yet again, at least in the short term. While the measure was originally crafted as a bipartisan bill in the hopes of snagging enough GOP votes to clear the Senate filibuster, the calculus has changed under Democratic majorities. Now, the focus of progressive is wider-reaching reforms to legalize and decriminalize marijuana nationally.

“You had a Republican Senate when the bill was first bandied about, and with the House flipping in 2018, it was definitely geared towards trying to get bipartisan support in the Senate,” said a financial services lobbyist. “Now, with Democrats taking over, it’s a different equation. It doesn’t go far enough and only addresses a very narrow issue.”

In July, Senate Majority Leader Chuck Schumer introduced the Cannabis Administration and Opportunity Act, which would remove the plant from the list of federally scheduled substances and expunge the records of nonviolent offenders charged with cannabis-related crimes.

Schumer said at the time the bill was unveiled that cannabis banking was not as high a priority as broader legalization, saying that “a banking bill deals with a small part of this but not what needs to be done,” he said. “We need a broad, comprehensive bill.”

But even if the SAFE Banking Act remains on the back burner in the coming months, analysts note that the measure is as popular as it has ever been.

“The sponsors of the SAFE Banking Act believe there’s more than 10 Senate Republicans who are ready to vote for it. If it got a vote in the Senate, I think a lot of people believe that there are certainly 60-plus votes for it, at least in concept, and it would pass,” the financial services lobbyist said.

But in the meantime, analysts say a vote in the Senate on any narrower cannabis bill may signal to Democratic supporters that the broader legalization effort is dead.

“To us, passage of the SAFE Act would kill efforts to enact other cannabis bills, including those that would legalize cannabis or provide capital markets access,” said Jaret Seiberg, managing director at Cowen Washington Research Group, in a research note.

Schumer “realizes this,” Seiberg added. “It is why we do not see him accepting SAFE as part of the defense policy bill. To do so, would be conceding that his broader legalization package will not advance.”

At the same time, sponsors of the the Cannabis Administration and Opportunity Act haveadmittedthe bill currently does not have the votes needed to become law. If it falters, Democrats will have at least one more opportunity to approve cannabis banking through the NDAA for fiscal year 2023.

“There will be another defense authorization bill with a Democratic majority in the House and Senate,” said Mills. “To me, this is part of the shot-on-goal approach that most successful legislation goes through. This is just part of the process.”

Brendan Pedersen

Reporter, American Banker