The U.S. House of Representatives passed H.R. 1595, known as the Secure And Fair Enforcement (SAFE) Banking Act, on Wednesday (Sept. 25). This bill was to allow and encourage federally-insured banks to work with cannabis shops in states that have legalized marijuana, as well as all Hemp and CBD related businesses that were legalized under the Farm Bill of 2018. The bill also prohibits federal regulators from terminating or limiting deposit insurance – which discouraged banks from offering financial services to cannabis or hemp businesses – and bars them from incentivizing or encouraging a bank to close accounts on the sole reason that a person is affiliated with a cannabis or hemp business.
The bill was sponsored by Congressmen Ed Perlmutter of Colorado, Denny Heck of Washington, Steve Stivers of Ohio, and Warren Davidson of Ohio, all members of the House Financial Services Committee. The legislation aims to ensure that state-authorized and regulated cannabis businesses are not forced to operate with cash only.
The SAFE Banking Act passed the House by a vote of 321-103 and now moves on to the U.S. Senate and still must be debated in the Republican-controlled Senate, where it could be amended. And it’s unclear if President Donald Trump would sign any version that reaches his desk.
Committee Chairwoman Maxine Waters of California voiced her support of the legislation, as well as calling for the House Judiciary Committee to advance legislation to address the criminalization of marijuana.
“This bipartisan bill addresses a pressing public safety issue for businesses that legally grow, market or sell cannabis in states that have legalized its use and that are currently forced to operate with cash only. 47 states, 3 territories, and D.C. have legalized some form of marijuana, and it is time for Congress to act,” she said. “Cannabis-related businesses are locked out of the banking system, and cannot maintain checking accounts, process payroll obligations, or pay taxes. The Financial Services Committee heard testimony in February that these cash-only businesses and their employees have become targets for violent criminals.”
She added that “the SAFE Banking Act addresses this serious problem by providing a safe harbor to financial institutions that choose to serve state-regulated cannabis businesses. The bill would also help others, like plumbers or electricians, who provide services to cannabis businesses but face similar challenges with access to banking services. With the passage of this bill, all of these businesses will gain access to traditional financial services that most businesses take for granted.”
Blocked from Banking
Banking access continues to be a hurdle for the cannabis industry.
Most cannabis entrepreneurs say they have at least limited access to banking services. But without big banks on board, they can’t accept credit cards from customers and they struggle to access traditional business loans that could help their businesses grow.
That limited access to banking also forces cannabis shops to operate in cash, something that makes them targets for crime and hinders tax collection. The cash-and-carry nature of the cannabis industry also makes it ripe for money laundering — the very accusation that’s kept big banks away.
Federal Fix Advances
Those issues could change if the SAFE Banking Act becomes law.
The bill doesn’t require banks to serve the marijuana industry. Instead, it says federal authorities can’t cut off deposit insurance or “take any other adverse action” against a bank just because it serves cannabis businesses and ancillary operations in states or American Indian territories that have legalized the industry.
It was spoken clearly when we voted to legalize adult use of cannabis, but existing federal regulations have created confusion for financial institutions and legal cannabis businesses in our state,” Porter said. “The small banks, investors, and entrepreneurs working in the legal cannabis industry deserve the level playing field the SAFE Banking Act provides.”
Major banking groups, including the American Bankers Association, wrote letters urging House members to approve the SAFE Banking Act.
“Although we do not take a position on the legalization of marijuana, our members are committed to serving the financial needs of their communities – including those that have voted to legalize cannabis,” they wrote.
A key question is whether financial institutions actually will take advantage of the new law. If banks continue to shy away from cannabis customers because marijuana remains federally illegal, California policymakers said they might pursue state solutions in the coming legislative session.