One of the biggest challenges facing the legal cannabis industry today (as we’ve covered extensively on this blog) is access to, or better yet lack of access to, banking services. Because the use and sale of marijuana remains illegal at the federal level, banks and credit unions have been hesitant to provide services to cannabis-related businesses, even in states that have legalized both medical and recreational cannabis. The concern from a banking perspective is that providing banking services to these companies could potentially lead to allegations of money laundering and aiding and abetting federally-illegal operations. While this has not completely prevented cannabis companies from operating in states where it is legal, it has forced a burgeoning industry to operate on a virtually all-cash basis, leading to many financial and safety concerns.
As a potential solution, in May 2017 Senator Jeff Merkely (D-OR) and Ed Perlmutter (D-CO) introduced the “Secure and Fair Enforcement (SAFE) Banking Act”, which proposed certain protections for banks against criminal and civil liabilities for serving legitimate cannabis companies that operate in compliance with applicable state law. The Safe Banking Act was not only intended to legitimize an up-and-coming industry, but also aimed to establish banking rules for valid cannabis companies and to enhance public safety (not to mention support the views of a majority of Americans). Many think that establishing a uniform set of rules will not only create regulation and oversight, but will also promote better transparency into these state-compliant cannabis operations.
The other key incentive in passing banking legislation is public safety. This is an industry that has billions of dollars in transactions, and yet is forced to operate almost entirely in cash. Aside from the logistical challenges that are caused by not having bank accounts, forcing companies to pay everything from employee salaries to rent payments in cash can attract criminal behavior. There have been multiple instances of robbery and violent crime that could have been prevented if cannabis businesses were not forced to operate with bags of cash.
While the 2017 bill was ultimately not successful, it did garner bi-partisan support from politicians and state attorneys general alike. This week, Congress will convene for another hearing on the SAFE Banking Act with many hoping that legislation will be passed to provide banks with a safe harbor to provide services to cannabis companies that operate legally at the state level. This would not resolve all of the conflicts that exist between state and federal law, but would be a giant stepping stone for an industry that is not going away any time soon.