The SAFE Banking Act is a landmark bill that relates to the ability of financial institutions, such as banks and credit unions, to provide financial services to legitimate marijuana-related businesses without risking repercussions under federal law or from financial regulators. The SAFE Banking Act was passed by the United States House of Representatives by a bipartisan vote of 321 to 103.
What are the key takeaways from the SAFE Banking Act?
The bill provides a safe harbor for financial institutions from federal liability for providing banking services to cannabis-related businesses and protects banks from forfeiture of security interests in collateral of marijuana-related businesses. The bill also contains language that would prevent financial regulators from limiting, prohibiting, terminating or otherwise negatively affecting financial institutions for banking cannabis. For example, the bill prohibits regulators from discouraging banks from offering financial services to marijuana-related businesses by terminating or limiting deposit insurance. A caveat in the bill, though, is that the marijuana-related businesses must be legitimate by operating within the state specific legal marijuana framework.
Why is the bill necessary for financial institutions and marijuana-related businesses?
Currently cannabis is legal in some form in 33 states. Yet, marijuana remains a Schedule I substance under the federal Controlled Substances Act. Therefore, financial institutions that provide banking services to marijuana-related businesses could face federal prosecution and also have significant legal and compliance obstacles. For those reasons, only a handful of financial institutions currently provide banking services, which in turn forces the cannabis industry to operate mainly in cash. Operating in cash is inefficient and increases the risk of crime, theft and embezzlement.
What’s next for the SAFE Banking Act?
The bill now advances to the U.S. Senate. The Senate Banking Committee Chairman, Mike Crapo (R-Idaho), has indicated a willingness to entertain and advance the bill, but that remains to be seen. For now, however, it remains that financial institutions that provide services and support for marijuana-related businesses continue to run the risk of federal prosecution and related sanctions.
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