SAFE Banking's Exclusion from the NDAA Obvious from the Start
The cannabis industry was hopeful the SAFE Banking Act would become law by the end of 2021. Democratic Representative Earl Perlmutter (CO–7)—the House chief author—said after SAFE was included in the National Defense Authorization Act (NDAA) that "fifth time is the charm." I never heard that saying before, and there's probably a reason why. We could have played out SAFE's inclusion in the NDAA in the House 20 times, and it would fail all 20 times. It didn’t fail coincidence or bad luck. Rather it is because there is not buy-in from Democratic senate leadership in passing SAFE as a stand alone measure.
Washington is a town driven by relationships. Who is in favor—or opposed—to legislation is more consequential to its viability than the merits of policy. A president will virtually never lose on an issue they care about. Presidents have significant levers as the nation's chief executive such as the bully pulpit, withholding federal funding to disruptive members districts, and offering a carrot of executive branch nominations such as a Cabinet or ambassador position. A recent example of this is the Iran Deal. The majority of Americans opposed it, an overwhelming majority of Democratic elected officials were on the record against through previous votes, public letters and statements, and campaign speeches. Nevertheless, he used those tactics and more to push the deal through congress.
In the legislative branch, the caucus leadership holds the power. Leadership sets the agenda, they decide what legislation makes it into omnibus bills, they negotiate on behalf of their caucus in conference committees, they control committee assignments and chair positions, they allocate campaign contributions from the caucus campaign fund, and they can recruit primary challengers to remove its members in elections. Committee chairs are also persuasive to its caucus on measures related to its committee, as they have the power to include or exclude policy measures from legislation.
To handicap whether or not legislative measures will pass, pay close attention to who its champions and supporters are, and who oppose it. If members of leadership are champions for legislation and their party holds the majority in both chambers, a measure will pass. If leadership is opposed to legislation, it will not pass.
There is an ideological battle in the Democratic between pragmatism and ideology for cannabis legalization. Unfortunately for the cannabis industry, it is a battle between rank-and-file members and leadership. The pragmatic wing is led by people like Perlmutter, Senator Michael Bennet (D–CO), and Senator Ron Wyden (D–OR) all have a robust industry in their states. They see the immediate need for cannabis businesses in their home district to access financial services. However, they are not significant leaders in the Democratic caucus.
The ideological side is led by Democratic leadership: Senator Cory Booker (D–NJ), backed up by Senate Majority Leader Charles Schumer (D–NY) and Senate Banking Committee Chair Sherrod Brown (D–OH). They want to see the a comprehensive federal legalization measure that includes equity and social justice along with financial services. They argue if congress passes SAFE Banking as a stand alone measure, congress will then deprioritize engaging on the other issues, and only the big companies and banks will benefit. Sen. Booker notably said he would "lay myself down" to block SAFE Banking as a stand alone measure. Something that Schumer echoed when he introduced the Cannabis Administration and Opportunity Act. Brown said he opposed SAFE as a stand alone measure because "it’s become too much about Wall Street and other banks and not enough about sentencing reform and it’s got to be both."
When you have that framework in mind, it was obvious from the start SAFE Banking was not going to be included in the final version of the NDAA. There is no way Schumer would allow its inclusion after he backed Booker's statements and introduced the CAOA. It is unimaginable Booker would go against his strong statement about stopping SAFE Banking, which is tied to his position as a figurehead of the Congressional Black Caucus and champion for social justice issues. In addition, the Senate Banking Committee Chair is on the record for being not in favor of SAFE Banking as a stand alone measure.
Is there any hope for SAFE Banking? Perhaps. Members in favor of getting SAFE Banking passed as quickly as possible tend to be from states with a robust recreational market. New York and New Jersey's recreational markets are recently legalized and over the next year or two will scale into multi-billion dollars respectively. This will put more pressure on Schumer and Booker as the banking issues operators face will become more local to them. In addition, Schumer is up for re-election in 2022 and so will have more freedom to operate when he has a fresh six years ahead of him.
SAFE Banking's failure is a story about leadership. Hopefully as the cannabis industry matures, it will learn from this and focus on getting buy-in from leadership on its measures before legislation is introduced. The best case scenario would be for members of leadership and key committee chairs to be the chief sponsors of legislation. The onus is on the industry to invest heavily in relationship building with the next generation of leadership, those who will ultimately succeed Schumer, Booker, and Brown.
