SAFE Can't Wait: Minority-Owned Cannabis Start-ups Need Banking Reform

By Gia Morón

A perfunctory bank form letter threw our small business into chaos. We were told our account would be closed and our funds returned in 30 days. To add salt to the wound, the bank said no explanation was forthcoming. The decision was final.

We were shocked. 

Companies like Women Grow, who are helping women cannabis entrepreneurs with necessary resources to succeed in the industry are unfortunately categorized as plant touching businesses. Many are often flagged by their banks solely because of their industry networking. Most are incorrectly decided upon as the same operational and business status as legal cannabis growers and distributors. But such is the state of disarray, irrational logic and confusion in cannabis banking. 

Too many business networking event producers, trade associations and advocacy groups are casualties in this way as are left bankless or having to search for a banking institution who will accommodate their needs.  Many do not meet the threshold requirements to open an account which asks for balances of seven figures or higher.

Federal banking laws differentiate between cannabis businesses like growers -- who ‘touch’ the plant -- and small businesses like ours which do not. But despite the fact 40 states have passed medical and adult use cannabis laws -- with more soon to do so -- It remains illegal for cannabis cultivators and distributors to fully access banking tools like credit cards, loans and lines of credit. By default, cash transactions are the predominant means of cannabis commerce. The result is dispensary robberies and compromised public safety. 

But it also means diminished economic opportunity for the minority communities here in New York most negatively affected over the decades by America’s failed war on cannabis. Without access to a bank account, small minority-owned cannabis startups granted state licenses -- lauded in Albany as aspirational beacons of economic hope -- are unsustainable. 

Congress can address public safety concerns and enhance the probability of cannabis start-up success by passing the bipartisan SAFE Banking Act. SAFE Banking wouldn’t legalize cannabis at the federal level -- that must come later. Yet it would finally bring America’s banking laws into the 21st century by fixing the cannabis sector’s cash-heavy predicament and the disjointed state and federal regulatory quagmire causing the problem. 

Specifically, the bill would permit banks to serve legal cannabis-related businesses, require federal banking regulators to provide uniform guidelines for cannabis-related accounts, and ensure that cannabis-related business proceeds are unencumbered. Banks would also be protected from civil and criminal sanctions for providing financial services to legitimate cannabis firms. Equity objectives cannot be achieved until this occurs.

We see first-hand engaging with our own members how passing SAFE Banking would be a game-changer for small cannabis startups operated by women and minority entrepreneurs generating just $50-75k annually. These micro-businesses barely break-even manufacturing and selling items like rolling trays, smoking devices, candles, apparel and other custom-branded products. 

However, just the mention or implication of cannabis involvement can strand them -- or any small business like accountants or legal advisors -- in the banking and credit wilderness. The fear, uncertainty and loss of business income has already forced too many talented entrepreneurs to shutter their small business. One’s credit rating, mortgage status -- everything that’s taken years of work to earn and maintain -- is left at risk by today’s banking rules. That’s unacceptable. 

Simply put, SAFE cannot wait. 

The SAFE Banking Act has already passed the U.S. House of Representatives seven times -- with overwhelming support from the New York congressional delegation. In the U.S. Senate, the bill has gained increasing bipartisan support through 2022 as dispensary violence has escalated and as more major states like New York and New Jersey commence adult use sales.

Senate Majority Leader Charles Schumer has the power and authority to bring the SAFE Banking Act up for a vote. The time for waiting is over. It is now the Senate’s turn to act.