In a significant win for hemp producers and businesses using hemp-derived products like cannabidiol (CBD), the U.S. House of Representatives passed the Secure and Fair Enforcement (SAFE) Banking Act on September 25. Though the SAFE Banking Act passed the House, the fight is just getting started.
Passing by a substantial 321 – 103 margin, this bill provides hope to hemp businesses in the U.S. in a market that’s estimated to grow to $22 billion by 2022. The House passage of this bill brings with it a small sigh of relief. The SAFE Banking Act has over 152 co-sponsors – equal to more than one-third of the entire House.
SAFE Banking Act Passes House: Aims to Protect Hemp Businesses
“It’s [a] historic moment that the SAFE Banking Act passed in the House,” says Andy Arnold, a contributor to CBD INTEL.
Because it means for the first time large financial institutions will accept money that deals with marijuana and auxiliary businesses. This act makes provisions for CBD, but we’re only putting the wheels in motion. Next step is for the act to go to [the] Senate before the end of 2019.
The SAFE Banking Act will not only protect sellers of CBD-derived products, but it will also aid farmers moving away from growing tobacco and investing in hemp production. The bill includes safe harbors for all banks and financial institutions doing business with companies in the hemp industry.
Up until now, most banks have been refusing to do business with the hemp industry, effectively shutting down CBD businesses.
“Vendors were not paid, customers were not fulfilled, chargebacks started coming in. Very quickly we had lost about $100,000.”
The Act, also known as H.R. 1595, draws a sorely needed but clear, legal line between hemp businesses and outlets working with marijuana. This bill will effectively remove the heightened regulations and scrutiny that applies to the marijuana industry. This then allows banks to legally work with the hemp industry.
Currently, merchant banking services, loans, and insurance options are minimal for legal hemp and CBD-related companies. This is, despite the removal of industrial hemp and non-psychotropic CBD products from the Controlled Substances Act by Congress in May 2018.
Though the House’s passage of the Act is a step forward in freeing the shackles placed on legal hemp businesses, there’s more work to do to get it passed in the Senate.
A Shady History Of Industrial Hemp And CBD Regulations In The US
Across the U.S. in 2019, states reported a massive increase in hemp growers’ licenses and farm acreage. Regrettably, business growth remains dramatically hampered by hemp’s wrongful association with marijuana, costing business owners billions. For years, hemp producers and businesses using hemp-derived goods have gotten their hopes up with new laws legalizing hemp – only to have them slashed by inconsistent and evolving regulations from federal and state agencies, including the Food & Drug Administration (FDA).
In 2014, President Obama signed the Farm Bill, which differentiated industrial hemp from marijuana, allowing states to grow and cultivate industrial hemp and CBD legally. The Farm Bill seemingly gave these businesses the green light, but it didn’t stop other regulatory agencies, like the DEA, from barring the way.
The DEA still classified hemp-derived products as a Schedule 1 drug. This means they have:
- A high potential for abuse.
- No current accepted medical treatment in the U.S.
- A lack of accepted safety for use under medical supervision.
CBD Health Research
“CBD is now the most researched cannabinoid on the market and rightly so because the studies go back to the 1940s proving its effectiveness on the nervous and immune systems, with no toxicity, side effects, nor psycho-activity,” says Jared Berry, CEO of Isodiol, a company that produces hemp-extracted CBD. In fact, cannabinoids are so safe and effective that the U.S. government put a patent on them in 1992.
In another move that showed promise, in December 2018, hemp was legalized without question by President Trump’s signing of the Farm Bill. This bill removed hemp entirely from the federal Controlled Substances Act and withdrew its Schedule 1 drug classification.
It seemed at last that legalized hemp would be regarded as safe. The health benefits of CBD are repeatedly confirmed in studies, and clinical trials of CBD are ongoing. Additionally, the World Health Organization (WHO) found no adverse health outcomes from CBD and several medical uses.
Despite ongoing studies and the pronouncement of safety from the WHO and industrial hemp businesses being legal, financial institutions were not yet on board with legal and regulatory compliances. So on May 15, 2019, merchant processor US Bank/Elavon backed out of the industry and dropped approximately 1,000 CBD-related business accounts in less than five months of signing them up. They pulled the trigger too fast, although we don’t yet know the real story.
Tragically, this move left businesses without means of processing non-cash transactions and without any way to get financing and loans to expand their businesses. It was a massive blow to the hemp and hemp-derived product industry, including HoneyColony’s sister site Simply Transformative.
Farm Bill Gives False Hope To The Hemp Industry
Though hemp business owners breathed a sigh of relief, the Farm Bill upheld the FDA’s authority to regulate cannabis or cannabis-derived compounds. It seemed that the Federal Food, Drug, and Cosmetic Act (FD&C Act) and section 351 of the Public Health Service Act reign supreme. And yet, the gray area in these regulations still had major financial institutions running away from the hemp and CBD industries.
To make matters worse, the FDA released a statement in December of 2018 stating that, “it’s unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived.”
“Because there is an FDA approved production on the market, the medical mafia rationalizes that CBD is now a drug and not a plant compound,” says HoneyColony Founder Maryam Henein who has been reporting on the politics of CBD since 2016. Epiodelix, a pharmaceutical drug, is the only FDA approved CBD.
The Power Of Big Pharma
Keep in mind that laws and regulations tend to be quite surmountable when pharmaceutical giants need them to be. When GW Pharmaceutical wanted to sell a drug containing CBD derived from hemp, the DEA’s Schedule 1 drug regulation was quite a nuisance. So, it was recategorized as a Schedule 5 drug (which includes over-the-counter drugs considered a low risk of addiction) in September 2018. A mere three months later, the FDA approved the first pharmaceutical CBD drug, Epidiolex, used to treat severe forms of childhood epilepsy. And yet, whole plant CBD oil has a long history of effectiveness and lack of side effects.
So how do all of these government regulations that pharmaceutical giants can swat away like a fly affect the average hemp business owner?
“What I have observed is a hesitancy of the banking industry to fully embrace an industry that is now legal in America,” Ryan Quarles, Kentucky’s Commissioner of Agriculture told Bloomberg Law.
Hemp-related businesses struggle to find banks to process transactions, to finance loans, and to manage merchant accounts. In Illinois alone, cannabis farmers took a beating with approximately $200 million in losses due to a lack of funds in 2019. Finding affordable insurance that will provide financial coverage in case of an accident or other loss is yet another obstacle.
Is The SAFE Banking Act The Hemp Industry’s Superhero?
So with the SAFE Banking Act passing the House, can hemp businesses finally relax knowing they will have access to the banking and insurance they need?
- The ongoing government oversight isn’t limited to companies selling CBD-containing products for alternative health and wellness. For centuries, hemp growers, producers, and distributors have provided the world with safe, legal, and vital hemp-derived products. According to the Ministry of Hemp, just a handful of products provided by companies that the SAFE Banking Act will protect are:
- Hemp seeds and oil
- Tea, coffee, bars, milk, butter, protein powder, alcohol, and other food products
- Clothing and accessories
- Soap, lotion, and other bath, body, and beauty products
- Essential oils and massage oils
- Animal bedding and other pet accessories
- Fuel and car manufacturing
- Sheets, towels, blankets, and other home goods and accessories
- Flags (ironically, the first American flag was made from industrial hemp)
- Farming and gardening supplies
- Home construction and other building materials
As you can see, the SAFE Banking Act means so much more than protecting a few small businesses. The entire hemp industry has the potential to secure a sustainable future for the world’s most essential products and goods.
The Senate’s Decision On The Safe Banking Act
If the SAFE Banking Act passes the Senate, it will provide a safe harbor for hemp financial transactions. It will ensure that banks and other financial institutions would not face legal punishment for those transactions. Additionally, it would bolster the hemp industry by:
- Requiring that federal financial regulators (like the FDIC, Federal Reserve, etc.) distribute clear and formal guidance to banks, credit card companies, and other financial institutions about the legality of hemp and CBD business.
- Prohibiting a federal bank from closing or limiting the insurance coverage of a business solely as a result of the establishment doing business with a hemp-related company.
- Preventing financial institutions from not doing business with companies due to the account holder’s affiliation with a hemp-related business.
- Forbidding punishment to financial institutions solely because they work with legal hemp businesses.
- Bolstering the state’s efforts to promote safety, regulatory compliance, and equity within the hemp industry.
Simply, the SAFE Banking Act would finally allow financial institutions the rightful opportunity to do business with legal hemp companies. It also gives businesses the opportunity to rightfully expand to their full potential.
But to become law, the U.S. Senate must pass the bill, too. “This is a significant hurdle,” says cannabis attorney Rod Kight, who goes on to state:
Unfortunately, and despite a handful of exceptions, the Republican Party has continued to stonewall cannabis reform bills. ‘Reefer madness’ stills reigns in the Senate. One of the exceptions, at least with respect to hemp, is Senator Mitch McConnell. Given that he has championed hemp, it is crucial that he is aware of how important the SAFE Banking Act is to ensuring the hemp industry’s future.
Now is the time to make our voices heard and take action.
Take Action Now To Protect Legal Hemp And CBD Businesses
Here’s more good news — financial institutions and banks want to do business with the industrial hemp industry. But, they need legal coverage to do it without scrutiny and punishment from government regulators. As long as legal hemp continues to be associated with the high-inducing marijuana, the industry will continue to hit roadblocks.
“I have a phone call with somebody every day trying to convince them that hemp is not marijuana,” said Jonathan Miller, general counsel to the industry trade group U.S. Hemp Roundtable.
You can help support the banking and financial transactions of legal hemp businesses, too. Send emails to your two U.S. Senators and urge them to support the SAFE Banking Act. You can do this with just a few clicks through the U.S. Hemp Roundtable’s web portal right here.
Watch HoneyColony Founder Maryam Henein Talk About About CBD & Banking And Merchant Processing
Dina Robison is a yoga instructor, freelance writer, life coach, and mom. She’s taught yoga since 2004 in New York City and Silicon Valley and has helped women attract their soulmates with her coaching and online courses.
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