Banking Cannabis-Related Businesses

Position

• ICBA does not advocate for the legalization of cannabis.

• ICBA advocates for federal legislation establishing an effective “safe harbor” from federal sanctions for banks that choose to do business with cannabis-related businesses (CRBs), including businesses that provide products or services to CRBs, in states where cannabis is legal under state law.

• This safe harbor must extend to banks that serve businesses that may serve CRBs (“ancillary businesses”) such as landlords, accountants, utility providers, and others as ancillary businesses may be paid in funds ultimately derived from cannabis sales.

• Federal banking regulators should not be able to threaten or limit a bank’s deposit insurance, downgrade a loan made to a CRB, force a depository institution to cease providing banking services to a CRB, or take any other prejudicial action in a state where cannabis is legal, solely because the customer is a CRB.

• ICBA opposes any effort by a state or municipality to establish a publicly owned bank or credit union to service the cannabis industry. Traditional banks are fully capable of serving this industry with the creation of an effective “safe harbor” to protect them from government or regulatory reprisal.

Background

In 2021, the trend of state-based cannabis legalization continued. Governors in New Jersey, New York, Virginia, New Mexico, and Connecticut each signed legislation to regulate cannabis for recreational, non-medical use. Currently, 18 states, two territories, and the District of Columbia permit recreational adult cannabis use, and cannabis is legal for medical use in 36 states and four territories.

An additional 11 states allow the use of "low THC, high cannabidiol (CBD)" products for medical reasons in limited situations or allow such conditions to be raised as a legal defense. Only Nebraska, Kansas, and Idaho have no public access cannabis programs.

As more states legalize cannabis for medical and/or recreational use, it is critically important that cannabis-related businesses (CRBs) have access to services provided by the traditional banking system. At the federal level, cannabis remains illegal under the Controlled Substances Act.

As CRBs continue to mature, the conflict between state and federal law creates increasingly significant legal and compliance concerns for state and federally chartered banks that wish to serve these businesses or continue to serve existing customers that may also do business with CRBs. CRBs have limited access to the traditional banking system, forcing them to operate mostly in cash. Cash-only businesses, especially those with a high volume of revenue, pose a significant risk to public safety.

Community banks should not be placed at a competitive disadvantage by the establishment of public banks or credit unions to serve CRBs. Traditional banks, with the protection of a safe harbor, are fully capable of serving the banking needs of CRBs. Moreover, history clearly indicates that financial service providers founded for narrow, specialized purposes inevitably expand beyond their original scope.

Tax-subsidized credit unions and the Farm Credit System have expanded well beyond their original limitations and now compete directly with community banks. Once established, a state or public “cannabis bank” would advocate relentlessly for additional powers to assure its longevity and survival, to the detriment of private-sector competitors.

Staff Contacts: Steve Keen, Aaron Stetter, and Rhonda Thomas-Whitley