Uncertainty Is the Known as U.S. House Passes Latest Version of SAFE Act
On April 19, the U.S. House of Representatives passed the SAFE Banking Act, 321-101. The fourth iteration of a bill is intended to expand access to financial services (i.e., deposits, loans, interest, etc.) to cannabis companies, and create safe harbor for banks and credit unions long discouraged from working with marijuana and CBD businesses due to fears over legal liabilities from federal prohibition of the drug. The latest version – having passed the House three times though never clearing the Senate – has been widely hailed as a positive step for the overall cannabis industry, but uncertainty over a single passage in the bill has sparked concern from hemp industry groups who worry that the bill will fail to live up to its promise of protecting hemp businesses.
“Legitimate” Hemp Businesses Only
The bill states: “the provisions of this Act… shall apply with respect to hemp-related legitimate businesses and hemp-related service providers” (emphasis added). However, no definition for what constitutes a “legitimate” hemp business is provided in the legislation: Does such a business need to operate in a state with approved USDA plans? Are businesses still operating under the 2014 Pilot Program rules included? What about foreign companies importing hemp products to the U.S.?
In 2020, 56% of licensed hemp cultivation – nearly 75% of harvested acreage – was cultivated under the old pilot program rules, in states without approved USDA plans. This includes several of the largest hemp producing states (i.e., Kentucky, Colorado, etc.).
According to a member of the National Industrial Hemp Council (NIHC), the perceived ambiguity of what counts as a legitimate hemp business has caused concerns that the SAFE Act will fail to protect hemp companies operating in those states.
It may seem a hair-splitting objection, but such fears are not unfounded in an industry characterized by ambiguous regulations which have served for years to stifle growth. Three years ago, hemp was still considered by the federal government as a Schedule-I controlled substance, despite being officially cultivated in dozens of states. Today, the U.S. Food & Drug Administration (FDA)’s official stance remains that CBD is an illegal food additive despite myriad CBD food products currently on the marketplace. Uncertain language creates uncertain rules, leaving it difficult for companies to operate intelligently and compliantly. Ironically, the SAFE Banking Act could very well end up causing rather more uncertainty than less for hemp operators and financial institutions trying to conduct legal business.
Will the fourth time be a charm? With support for marijuana legalization at an all-time high, and a Democratic-majority Senate in power, proponents note that the bill’s chances are better than ever, though others see political obstacles remaining.
Meanwhile, industry groups are working with Congress to secure assurances that the bill will indeed apply to all legally licensed hemp companies. Though the ambiguous language in the bill is unlikely to significantly derail the industry, the exercise suggests that an increasingly organized hemp industry is capable of working with lawmakers to overcome regulatory barriers.