UPDATE: It passed! Look for a blog tomorrow with what this means for industry, and what to expect next.
The U.S. House of Representatives is expected to vote soon on the Secure and Fair Enforcement Banking Act of 2019 (the “SAFE Banking Act”) today. As a recap, the SAFE Banking Act would shield banking institutions that serve cannabis-related businesses from federal penalties in states where the cultivation, production, manufacturing, sale, transportation, dispensing, and distribution of cannabis is legal.
The SAFE Banking Act would: (i) prevent federal banking regulators from halting banks’ services or punishing banks for providing services to cannabis-related businesses that are in compliance with state laws; (ii) protect ancillary businesses in the cannabis industry from money laundering charges and other financial crimes; and (iii) require the Federal Financial Institutions Examination Council (“FFIEC”) to develop guidance to help financial institutions understand how to serve cannabis businesses.
Because marijuana (or “marihuana” under the Controlled Substances Act) is federally illegal, banking institutions currently face potential repercussions and federal sanctions by working with those in the cannabis industry. In light of these concerns, most banks have denied cannabis-related businesses access to bank accounts and other financial services. As a result, many marijuana businesses have remained cash-only. As cash-only businesses, many cannabis businesses become possible targets for theft. By allowing banks to provide services to the cannabis industry, the SAFE Banking Act aims to increase public safety by reducing the amount of cash at a marijuana business.
As a related side note on hemp, although the Agricultural Improvement Act of 2018 (the “2018 Farm Bill”) removed hemp from the definition of marijuana under the Controlled Substances Act, many financial institutions and their affiliates have refrained from offering banking services to hemp businesses. In practice, the passage of the SAFE Banking Act should alleviate apprehension regarding hemp on the side of financial institutions.
With a majority of state now allowing for some form of cannabis (33 medical, 11 adult-use recreational, and 47 with hemp laws) the time for Congress to act has come. Although many are expecting SAFE Banking Act to pass in the House, the passage in a Republican-controlled Senate is more uncertain. If you support the cannabis industry, or if you understand the importance of increasing public safety by providing cannabis-related businesses access to financial services, we would strongly encourage that you urge your members of Congress to support the SAFE Banking Act.