With the whistleblower drama now rocking D.C., you could be forgiven if you missed it, but legislation that’s critical to a promising new Illinois industry passed out of the House on Sept. 25 and now awaits its fate in a less-than-friendly Senate.
The House bill—known as the Secure And Fair Enforcement (SAFE) Banking Act—would change the cash-only nature of the cannabis business by granting producers, distributors and retailers access to financial services and allowing banks to do business with marijuana enterprises without fearing federal prosecution.
Even after 33 states nationwide legalized the use of marijuana either for medical or recreational use, cannabis is still illegal at the federal level, classified as a Schedule I drug. This legal mismatch has largely shut off the cannabis industry from access to financial services, forcing companies in this sector to operate mostly in cash. The SAFE Act would forbid federal banking regulators from charging bankers with money laundering or other financial crimes for working with marijuana-related businesses.
As Crain’s reporter Minho Kim writes in this week’s issue, the lack of a banking system has held the cannabis industry back in many ways—from simply making cash-rich operators the target of armed robberies and theft to burdening them with fees for cash storage, armored vehicles and insurance. The bank freeze-out also makes it next to impossible for small entrepreneurs to enter the cannabis industry. Banks fear making new loans to marijuana businesses, disproportionately affecting minorities, who often struggle to come up with the money it takes to start a business.
Like it or not, cannabis is becoming a big business in the United States, and Illinois is about to join the vanguard of large states with a legal recreational market. Illinois could be a $2 billion recreational marijuana market, by some estimates—and it’s reasonable to expect the opportunities will only grow if these enterprises are granted the kind of banking opportunities that other sectors take for granted. With 2 out of 3 Americans now favoring marijuana legalization, it seems likely more states will follow in Illinois' footsteps.
Chicago banks, meanwhile, would love nothing better than to go after this brand-new, and fast-growing, industry. But few of them will without an explicit green light from Washington.
Eighty-nine House Republicans voted in favor of the SAFE Act. But few observers expect Senate Republicans to be as willing to go along with an industry that, despite shifting public sentiment, hasn’t entirely shaken its black-market reputation. And for Illinois, which is counting on a steady stream of cannabis tax revenue, that’s bad news.