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SAFE Banking Act Would Protect CRE In Cannabis Deals

Federal legislation to allow cannabis-related businesses access to the regular banking system, as well as provide protection for commercial real estate companies doing business with CRBs, took another step forward in late July when the Banking, Housing and Urban Affairs Committee of the U.S. Senate heard first-of-its-kind testimony on the bill. 

Marijuana growhouse

The measure, known as the Secure and Fair Enforcement (SAFE) Banking Act (S. 1200) would protect businesses from federal prosecution for dealing with CRBs that are legal under state law, such as providing loans or lines of credit in the case of banks, or leasing space for a recreational cannabis store or industrial facility for cultivation in the case of real estate interests.

"The fundamental issue is, this is illegal from a federal perspective," Citywide Banks President and CEO Joanne Sherwood told the committee. That is why the bank doesn't have CRB clients, she said, even though it is based in Colorado, where recreational cannabis is legal under state law.

The reluctance of banks to deal with CRBs means that legitimate businesses operate on a cash-only basis, which can pose a safety risk for employees, as well as provide opportunities for tax evasion and other white-collar crimes.

Currently, banks that provide services to CRBs could be prosecuted for violating federal money laundering laws. Real estate companies could likewise be prosecuted for dealing with CRBs.

That possibility has CRE execs reluctant to do business with the cannabis industry. According to Seyfarth Shaw’s fourth annual Real Estate Market Sentiment Survey published earlier this year, 85% of CRE leaders will not invest in the cannabis industry in 2019, since there is still too much uncertainty for their liking.

Commercial real estate isn't completely shying away from cannabis, however. Some companies are creating cannabis divisions to help tenants find locations for dispensaries, warehouses and farms, CoStar reports.

Though its future is uncertain, the Senate bill, along with a companion bill in the U.S. House of Representatives (H.R. 1595), has wide support. In May, for example, 38 state and territory attorneys general sent a letter to congressional leaders urging passage of the House version of the bill. Seventeen state treasurers have come out in favor of its passage as well.

Various organizations also support the measures, including the Credit Union National Association, the Independent Community Bankers Association, the America Bankers Association and the Real Estate Roundtable. 

"Without a bank account, dispensaries and other legal CRBs must operate on a cash basis," Roundtable President and CEO Jeffrey DeBoer said in a statement earlier this year in support of the measure. 

"Risks of crime thus increase and tax revenues to pay for infrastructure and other government services are potentially lost. S. 1200 can significantly address these problems by providing protections for banks, real estate firms and their employees from punishment simply because they aim to serve businesses within … states that have legalized marijuana to varying degrees."