A SAFE Start Serves As A Springboard To Broader Cannabis Reform

By Brady Cobb

Over a year after the Democratic Party regained control of the White House and Congress, it has largely underdelivered on its commitments to passing substantial cannabis reforms. Ironically enough, it was Republican Congresswoman Nancy Mace (R-SC), who reignited both the prospects of cannabis reform and the American cannabis markets in recent weeks after her proposed States Reform Act —which was formally introduced on November 15, hit the street as the most passable federal cannabis legislation that’s been floated to date.  

The States Reform Act adopts a common-sense approach that would federally decriminalize cannabis, enable states to regulate their own cannabis markets, allow the federal government to regulate cannabis like the alcohol industry, create a pathway to release or expunge non-violent federal cannabis offenders, ensure veteran access to medical cannabis and apply a workable 3% federal excise tax on cannabis products. This legislation demonstrates the underlying, and underreported, Republican support for federal cannabis reform, and Representative Mace’s bill emerges at an incredibly opportune moment as the Senate is set to take up the National Defense Authorization Act (NDAA) －which must pass ahead of the upcoming fiscal year.

While the SAFE Banking Act was included in the House version of the NDAA that passed in October, it remains to be seen whether Democratic leaders in the Senate including Majority Leader Chuck Schumer and Senator Cory Booker will allow SAFE to pass as part of the NDAA in the upcoming conference process. Their primary objection to the measure is that it does not include restorative social justice language, which should not be surprising as it is both a banking and community safety focused bill, and the fact remains that Democratic president Joe Biden could obviate the federal social justice conundrum with a simple stroke of his pen by fulfilling a campaign promise to pardon non-violent cannabis offenders. 

Although it is encouraging to see both Democrats and Republicans laying the groundwork to pass practical cannabis legislation, the most feasible path forward is still the SAFE Banking Act.  Most industry stakeholders would argue that we are close to securing our first federal victory in our movement to harmonize state and federal cannabis laws, and that first win must be the passage of the SAFE Banking Act as part of the NDAA.

The Stakes Are Higher Than Ever to Pass Consequential Cannabis Reforms

This sets up a high-stakes political showdown over cannabis legislation between Democratic leadership in the Senate, moderate Democrats and Republicans in both legislative branches who support SAFE as part of the NDAA and the American public who have reported overwhelming levels of support for federal cannabis reform in recent polls. 

While Majority Leader Schumer, Senator Booker and Senator Wyden have continuously vocalized their intentions to pass cannabis legislation since January and introduced a discussion draft of their own reform bill, the Cannabis Administration & Opportunity Act (CAOA), they have yet to secure a meaningful win on cannabis policy to date. With the midterm elections quickly approaching, any perceived inaction on the Democrats’ side could strip them of their majority in both chambers if the recent Virginia election is any predictor of what will happen next November. Allowing the SAFE Banking to pass as part of the NDAA would secure the first cannabis policy reform victory for Democrats, and the impact of this win should not be overlooked by Democratic leadership. 

Since the SAFE Banking Act was first introduced in 2019, the bill has passed five times in the House  with increasing bipartisan support at each passage －most recently in September 2021－but its momentum has more or less fizzled in the Senate. Although Democrats, including have been some of the most outspoken proponents of federal legalization, they have largely overlooked the SAFE Banking Act. Each passing month of stalled negotiations and subsequent inaction will only increase the untenable financial and safety risks facing over 300,000 Americans currently working in the legal cannabis industry, as well as the opportunity costs shouldered by established multi-state operators and local small businesses －especially social equity applicants. 

Without the SAFE Banking Act, regulated cannabis companies, which are still viewed as illegal operations by the federal government, cannot access traditional banking services or list on U.S. securities exchanges. Legal companies also still cannot process credit cards, forcing most to operate as cash-only businesses and thereby subjecting workers to potential robberies. The externalities created by a lack of cannabis reforms not only impact American consumers but also local state budgets and underrepresented social equity cannabis entrepreneurs who often face more challenges accessing the affordable capital to start their businesses. Simply put, the modern cannabis industry cannot reach its full potential until consequential banking and decriminalization bills are signed into law. 

The Senate Must Double Down on Industry Momentum to Pass SAFE Now, With an Eye Towards Crafting a Passable Compromise Legalization Bill Before the Midterms

While the introduction of a discussion draft of the CAOA on September 1 by Majority Leader Schumer was a watershed moment for the American cannabis reform movement this year, it has so far proved to be just that－ a moment. The CAOA was largely aspirational, considering how its drafters took a broad based approach that rendered the proposed legislation both politically and operationally untenable. Democrats are essentially back to the drawing board and must refocus their efforts on passing provisions originally outlined in SAFE. 

Compared to the CAOA, the States Reform Act presents a middle-of-the-road alternative that is both passable and operationally realistic from an implementation standpoint. As Democrats in Congress grapple with record high disapproval ratings under the current administration, Senator Schumer has a narrowing window of opportunity to finally deliver on a key agenda item this year by incorporating SAFE in the NDAA via the upcoming conference process. Cannabis reform has been a hallmark of the Democratic Party’s recent platform, and the growing Republican support for SAFE and the States Reform Act should not be taken as a political trap, but rather as an invitation for Schumer to reach across the aisle and clinch the win for his own party and the American cannabis community. 

Thereafter, with the momentum of a win filling the sails of the broader cannabis reform movement as we approach the midterm elections in 2022, both Democrats and Republicans can begin the negotiation process on a broader reform bill with the CAOA and the States Reform Act being the guideposts. 

SAFE is Only the First Step to Expanding Industry-Wide Accessibility

While progressive Democrats have well-intentioned objections to the lack of social equity language in the SAFE Banking Act, the reality is that the bill was intentionally crafted to ensure that conservative Democrats and Republicans would seriously consider the proposals and ultimately allow it to pass. At the same time, many Black cannabis entrepreneurs and The U.S. Cannabis Council have consistently expressed support for SAFE and even raised concerns about the lack of banking opportunities “creating a redlining effect” in legal markets. 

In today’s culture that revolves around instant gratification, it’s important to remember that lawmakers in D.C. still abide by the tried-and-true tactic of incrementalism to implement lasting legislation. In this scenario, SAFE would be the first domino to fall in the path towards legalization and create a solid foundation for more equity-focused bills to eventually pass in Congress.

Moreover, true social equity reform cannot be achieved at the federal level alone, as the lion’s share of cannabis convictions fall under the jurisdiction of state-level criminal justice systems. Consider how only 19 out of 20,000 drug-related federal convictions in 2017 were for cannabis-related offenses and 86% of the 350,000 cannabis arrests in 2019 were for state level possession charges. A broader state and federal partnership will be needed to realize true social justice for the Americans who have been harmed by this 80 year ill-fated war on cannabis, and that is unfortunately going to take time. 

The NDAA could be one of the last chances this year to give the budding cannabis industry the financial resources to flourish and become a productive member of the wider business community. The opportunity to secure the first real win for the cannabis legalization movement has presented itself through the NDAA  and the SAFE Banking Amendment. Congressional leaders must seize the opportunity and use the passage of SAFE as a springboard to achieve broader legalization reforms in 2022.