The Secure and Fair Enforcement Regulations (SAFER) Act has been around Congress in one form or another for several years. While it has an ominous name, the reality is that the bill does, in essence, one simple thing: it creates a carve-out for federally-insured financial institutions in states that have legalized cannabis to accept funds that are connected to cannabis sales.
The first state to legalize medicinal cannabis, California, did so nearly thirty years ago in 1996. Since then, all but ten states have legalized cannabis, or marijuana, for medicinal purposes, and of those, twenty-four and the District of Columbia have approved it for recreational purposes. Marijuana remains a Schedule I substance under the Controlled Substances Act, which means that, officially the federal government does not allow for any acceptable uses of it, medicinal or otherwise. These conflicting regimes at the state and national levels have created a complicated set of legal and regulatory questions around the rapidly growing cannabis industry, many of which center around the question of what to do with income from state-legal cannabis sales?
A major challenge is that the cannabis industry is growing at a rapid pace—its estimated retail sales were between $33.5 billion in 2023 with projected growth of nearly $40 billion in 2024.
Under the law, technically any income—regardless of how downstream from the actual source it is—that is connected to the sale of cannabis cannot be deposited into a federally-insured financial institution. The IRS and other federal financial regulators have put pressure on banks to deny opening “marijuana business accounts,” and perhaps more concerning, the threat of civil asset forfeiture—when federal authorities confiscate proceeds and any real or personal property traceable to marijuana sales—is still out there. As a result, many financial institutions will not provide services to cannabis-related businesses, including business loans, payroll services, or checking accounts. Technically if those same banks were to learn that any business that banks with them—perhaps a real estate brokerage—received income tied to cannabis—perhaps a commission on the sale of a warehouse to a cannabis refining company—they could close those accounts and end the services provided to them as well.
A major challenge is that the cannabis industry is growing at a rapid pace—its estimated retail sales were between $33.5 billion in 2023 with projected growth of nearly $40 billion in 2024, and it accounted for over 400,000 U.S. jobs. For the real estate industry, cannabis businesses represent an array of clients with the potential for growth and future business down the road. Growing marijuana takes space—open land, yes, but also warehouses or other properties that can be converted to greenhouses—and then it needs to be refined in an industrial facility to be turned into the variety of products and forms it is sold in, then stored, and ultimately placed in a retail space, which may then have a property manager to oversee it. At every step a real estate professional will be involved and compensated for their work.
In addition to making it easier for those with funds that come from cannabis sales, the SAFER Banking Act has benefits for the government and the communities where cannabis is dispensed. It is much easier for a company to pay their taxes when they don’t have to drive to an IRS office and do so in cash, and it is much easier for the federal financial regulators to track and prevent money-laundering activities when they can work with a financial institution to do so. All-cash businesses also tend to be targets for crime, so reducing the amount of cash they keep in the store may improve neighborhood safety.
The 118th Congress has made important progress toward passing the SAFER Banking Act—in September of 2023 the Senate Banking Committee, led by Chair Senator Sherrod Brown (D-OH) and Ranking Member Senator Tim Scott (R-SC), held a hearing on the bill and passed it by a bipartisan vote of 14-9. This is the first time that the Senate Banking Committee has addressed the bill, and it is a crucial step in getting it to a floor vote in the Senate. After that, it will need to be sent to the House for passage. NAR will continue to advocate for the SAFER Banking Act’s passage and encourage its progress in the Senate and House, reminding our national policymakers of its impact on real estate and the economy as a whole.