The House Financial Services Subcommittee on Consumer Protection and Financial Institutions (the "Committee") held a hearing on access to banking services for cannabis-related businesses. At the hearing, the Committee considered a "discussion draft" of the Secure and Fair Enforcement Banking Act of 2019 (the "SAFE Act of 2019"), which would allow banks to provide banking services to state-legal cannabis businesses.

According to a staff memorandum, numerous financial institutions expressed interest in providing banking services to state-authorized cannabis-related businesses. The staff memorandum describes the central issue: because cannabis remains illegal under the federal Controlled Substances Act, "the cultivation, possession, and distribution of marijuana are [generally] illegal," and because transacting business with the proceeds of illegal activity is money laundering, most financial institutions do not offer banking services to direct or cannabis-adjacent businesses. Staff notes that only three States have not authorized cannabis use to some degree.

As proposed by Representatives Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH) and Warren Davison (D-OH), the SAFE Act of 2019 would:

  • harmonize "federal and state law concerning cannabis-related businesses and allow these businesses access to banking services"; and
  • exempt depository institutions and their employees from "federal prosecution or investigation solely for providing banking services to state-authorized cannabis-related business."

As compared to the SAFE Act of 2017, the discussion draft of the SAFE Act of 2019, among other things: (i) adds protection for "ancillary businesses providing products or services to a cannabis-related legitimate business," (ii) clarifies how business on a tribal land could qualify and (iii) obligates the Federal Financial Institutions Examination Council to devise guidance to aid financial institutions to lawfully service cannabis-related business.

Commentary / Jodi Avergun

The legalization of cannabis in Canada, the new leadership in the House of Representatives and increasingly relaxed attitudes toward cannabis would seem to bode well for the passage of the SAFE Act in this Congress. Nevertheless, from the hearings yesterday, members on both sides of the aisle insisted that more study was needed before a banking safe harbor could be enacted. The lure of investment opportunity and the increasing competition from Canada however, is likely to pressure legislators to act sooner rather than later.

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