The Marijuana Banking Bill is Back and Stronger Than Ever

SAFE banking cannabis

Six years after it was initially introduced, the House Financial Services Committee released the latest draft legislation that would create a “safe harbor” for banks to serve the rapidly expanding cannabis industry on February 7, 2019. Entitled the “Secure and Fair Enforcement Banking Act of 2019” (or, the “SAFE Banking Act of 2019”), the bill aims to prohibit federal regulators from penalizing banks and other financial institutions that provide banking services to marijuana businesses, marijuana-related businesses, and their owners and employees.

As a reminder, thirty-three states and the District of Columbia have legalized the sale and use of medical marijuana, while ten states and the District of Columbia have approved marijuana for adult or recreational use. With the fast-growing acceptance of cannabis evident as ever, the bill’s supporters claim that it would provide sorely needed legal clarity at a time when the cannabis industry faces serious financial and security risks. Accompanying the draft legislation was a memorandum prepared by the Financial Services Committee, which explains the reasoning behind this renewed push for legislation:

An increasing number of financial institutions have expressed interest in providing banking services to state authorized cannabis-related businesses as nearly all states have authorized various degrees of cannabis use, such as for medical use … However, many financial institutions are refraining from offering banking services to these businesses based on several legal and compliance risks. … As such, cannabis-related businesses have been described as a “soft target” for being robbed and assaulted, having their stores broken into, and their plants stolen” (citations omitted).

Generally, this iteration of the SAFE Banking Act pushes for even greater protections than those included in prior versions by including some new provisions, including:

1. Identifies (for the first time) and adds protections for ancillary businesses providing products or services to cannabis-related legitimate businesses (this is huge because even banks that would choose not to provide services to cannabis businesses may get caught under the present scheme);

2. Adds protections for marijuana-related “retirement plans or exchange traded funds” and “the sale or lease of real or any property [and] legal or other licensed services … relating to cannabis”;

3. Adds protections for the “distributing or deriving any proceeds, directly or indirectly, from cannabis or cannabis products”;

4. Specifies how businesses on tribal land could qualify; and

5. Requires that the Federal Financial Institution Examination Council develop guidance to help financial institutions lawfully serve cannabis-related legitimate businesses.

The general purpose and directive of the Safe Banking Act is arguably summarized by the following catch-all provision:

[P]roceeds from a transaction conducted by a cannabis-related legitimate business shall not be considered as proceeds from an unlawful activity solely because the transaction was conducted by a cannabis-related legitimate business.”

The bill is authored by Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH), and Warren Davidson (R-OH), who have indicated that they plan to re-introduce the SAFE Banking Act by the end of the month. The House Subcommittee on Consumer Protection and Financial Institutions has already held hearings, which seem to have gone well. Looking ahead, it’s likely that the House Financial Services Committee will also hold a hearing and potentially mark up the bill. Based on the SAFE Banking Act’s reception, and with so many other cannabis-related issues on the table, we might be seeing a much more expansive bill to end federal cannabis prohibition for good in the near future.