Senate Again Rejects SAFE Banking Act, Extending Financial Institutions’ Compliance Quandary
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Key takeaways:
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On December 7, 2021, the Senate rejected efforts to include the SAFE Banking Act in the National Defense Authorization Act for 2022. This is the fifth time the bill—which would allow financial institutions to work with marijuana-related businesses in compliance with state law—has been passed by the House of Representatives but has failed to come up for a vote in the Senate. Marijuana reform efforts face opposition from both sides of the aisle, and the Biden administration has not signaled clear support.
- Without reform such as the SAFE Banking Act, financial institutions remain reticent about dealing with marijuana-related businesses due to the potential for liability, compliance costs, and other financial crime and reputational risk concerns. Avoiding connections with entities that “touch the plant” is increasingly difficult for banking organizations as the marijuana industry grows in the United States, with medicinal use of marijuana now legal in 36 states and the District of Columbia and recreational use now legal in 18 of those states and the District of Columbia.
- Securities firms are also wrestling with how to engage with marijuana businesses, and they differ on whether they prohibit or allow trading in securities that “touch the plant.”