Government Building with funds, cannabis leaf

Historic? The Safe Banking Act: What Does It Actually Mean?

Historic. Unprecedented. Progressive. Momentous. Did we say historic?

These are just some of the words being used to describe the House of Representatives passing the Secure And Fair Enforcement Banking Act of 2019, or as it’s more commonly known: the Safe Banking Act (‘SBA’).

There’s been a lot written about the SBA over the past few days, but let’s break it down to its simplest form: what does it mean?

The Safe Banking Act

As of today, it means absolutely nothing; zilch, zero, nada.  Until it passes the Senate, that is. 

Schoolhouse Rock Bill

As everyone remembers from seventh grade social studies, a bill doesn’t become law until it passes both the House of Representatives and the Senate, and thereafter signed by the President. Then and only then will the SBA become a real honest to goodness law.

The Hurdles

But if one were just reading headlines this week, they’d think the SBA was a fully formed law, and you can stroll into your local dispensary to put an ounce of your favorite flower down on the Amex. We’re not quite there yet.

There are still plenty of hurdles before the Senate passes the SBA, and although the likelihood is rising, most experts still put it at 3-1 odds that it actually gets passed in the Senate.

What If The SBA Does Get Passed?

But let’s say that it does. Let’s put positive thoughts out there into the universe and fast-forward to a hypothetical world where the SBA is signed into law. What does that mean?

How Does The SBA Improve Safety?

Safety. A business that’s required to do all transactions in cash is a magnet for violent crime. One of the more persuasive arguments made on the House floor was about a security guard at a Colorado cannabis facility who was shot and killed on the job.

Everyone knows that dispensaries have no other option other than to transact in large amounts of cash, and that includes the bad guys.

Therefore the dispensaries are a prime target for crime.

How Do You Deal With Dispensary Robberies?

As cannabis builders, we’re well aware of the special security considerations that have to be taken into account due to the cash-only nature of the industry. In fact, we install special security measures specifically designed because of the cash on hand.

This creates a financial burden that retailers in other industries don’t have to incur. We won’t disclose details, but rest assured, if the SBA were enacted, the dispensary owners would have a large financial burden alleviated.

What Does the SBA Change?

The cost of security measures are a far second when it comes to life safety. If the SBA goes into law, cannabis dispensaries would be able to transact business using credit and debit, which greatly reduces the amount of cash on hand and would instantly mitigate the violent crimes aimed towards these facilities.

These dispensaries can be run less like banks and more like what they really are, which are retail establishments. 

Cannabis on US bills

How Does the SBA Increase Legitimacy?

The SBA brings some well deserved legitimacy to the cannabis industry that’s currently lacking across the country.

Of course, in states that have legalized cannabis, businesses are more commonplace and therefore more legitimate. But there are only eleven states where cannabis is fully legal, so that’s the exception and not the norm.

The Stigma Around Cannabis

Warranted or not, cannabis still has a stigma, and many opponents point to the fact that the federal government will not acknowledge cannabis as a legitimate business. If it’s not good enough for our federal government, then it’s not good enough for them. That argument goes by the wayside once the SBA is enacted.

Across the country, we have state of the art cultivation centers, and dispensaries that rival Apple stores in terms of design and tech, yet the cannabis world is still very much a world forced to work in cash transactions like a third world country.

Economic Impact

When businesses can’t work with banks and lenders, it makes it very difficult to grow as an industry. And it’s not just cannabis providers and distributors that banks are hesitant to work with. Even third parties such as builders have challenges working with financial institutions if they’re receiving revenue from cannabis companies. By enacting the SBA, cannabis companies will be able to obtain loans, lines of credit, and other banking services. This is exactly as it should be in a free market.

The ability to obtain credit will also level the playing field for businesses who want to enter the cannabis industry but don’t have access to the initial capital or cash investors. More equity equals more competition, which is what a free capitalist market thrives upon.

Just like the liquor industry, pharmaceutical industry or clothing industry, the cannabis industry will be able to work in a free, open market that will create legitimacy and lead to growth. 

Banking and Cannabis

How Does The SBA Decriminalize the Cannabis Industry?

If passed into law, the SBA will be seen as the first step in reform that could very well pave the way towards decriminalization.

It may not be now, it may not be in the next five years, it may not even be in the next decade, but federal decriminalization is most likely coming and it can’t happen without the SBA.

Future Implications

If the federal government allows the cannabis industry to run as a true business that can utilize the banking system, Congress will be more likely to pass other legislation down the line.

Currently, cannabis is an 11 billion dollar industry. That’s Billion with a capital B. Those are very real numbers that wouldn’t be what they are unless the population demanded it. Craft cannabis has even sprung up, just like craft beer or coffee.

There’s a multitude of reasons why cannabis is in demand, and those can be discussed and debated ad nauseam. But what’s important is not why cannabis is in demand, but just the fact that it is.

Many financial forecasts have predicted that within ten years the cannabis industry will equal or surpass the liquor industry in terms of sales and market share. If that’s the case, then the only scenario that makes sense is federal decriminalization.

And the SBA is the beginning of a full-fledged federal cannabis reform, which can pave the way towards decriminalization. 

Rep Ed Perlmutter sponsoring Safe Banking Act (SBA)
Rep Ed Perlmutter (D) deserves much credit for sponsoring and spearheading the SBA

What Does It Take To Pass?

Yes, it was important that the House voted to pass the SBA, but the ball is now in the Senate’s court.

The SBA may get approved in its current iteration or go back for a modified version, or just be voted down outright. There are a lot of options on the table.

However, we would be surprised if some version of the SBA isn’t approved by the Senate in the near future and eventually signed into law.

This will benefit an 11 billion dollar industry that currently has no access to banking, lending, or credit. At Grow America Builders, we’re very excited that the House of Representatives passed the SBA, but it’s now up to the Senate to do the right thing and pass it as well.

Now that, would be historic.