Recently, the Washington Post ran the story “Silicon Valley Bank worked with start-ups others rejected. Now founders are lost”. The article discusses how SVB served risky tech businesses that otherwise found it difficult to obtain banking services. Many of these former customers of SVB are now concerned about finding new financial solutions.
The difficulty in finding financial services will sound familiar to those of us that provide legal and other services to cannabis licensees. What I find ironic, however, is the Federal Government’s covering all deposits, including uninsured deposits, in a bank that thrived upon serving risky customers at the same time as the Federal Government fails to move ahead in providing financial services to a proven and lucrative sector of the economy – the cannabis industry.
While the Federal Government continues to prop up the tech and crypto industries, the SAFE Banking Act, which would permit financial institutions to provide banking services to cannabis related businesses, continues to languish in Congress. In states like Washington , where recreational cannabis businesses have been legally operating since 2013, cannabis businesses cannot obtain banking services outside of a few state chartered credit unions. This means that my cannabis licensee clients cannot obtain commercial loans, use credit card services, access escrow and title services in real estate transactions, etc.
It is true that many jobs could have been affected or lost if large depositors of SVB had not been made whole; and the bailout may in fact have staved off a larger financial crisis. But, if we are going to consider the tech sector worthy of special financial support then the same consideration should be given to the legal cannabis industry, which the Leafly Jobs Report estimates to support over 428,000 jobs, and has been operating successfully and without a great deal of volatility for over a decade in many states.
I laud President Biden’s announcement late last year of reconsidering the scheduling of cannabis under the Federal Controlled Substances Act. It is high time, however, for the SAFE Banking Act to be passed. The cannabis industry has emerged as an important and stable sector of the national economy and should be provided the same financial services as other business sectors.
For more information on the regulation of cannabis businesses in Washington State, please contact Heather Wolf.