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Clearing the Air Over Cannabis Banking Legislation

aaron-stetter-150pxBy Aaron Stetter

ICBA recently supported legislation that would protect the traditional banking system when banking cannabis-related businesses in states where cannabis is legal for medical or recreational use. To ensure ICBA’s position on this hot-button issue isn’t misunderstood, let’s break down exactly what ICBA does support and why.

What is ICBA supporting?

ICBA recently backed the Secure and Fair Enforcement Banking Act (H.R. 2215 and S. 1152), or SAFE Banking Act. It would establish a safe harbor from federal sanctions for financial institutions that serve cannabis-related businesses in states where cannabis is legal.

What would this mean for community banks?

In states that have legalized cannabis for medical or recreational use, federal banking regulators would not be allowed to threaten or limit a bank’s deposit insurance, downgrade a loan, prohibit or discourage the provision of banking services, or take any other prejudicial action solely because it serves a cannabis-related business.

Why do we need it?

The conflict between state and federal law on cannabis-related businesses has created significant legal and compliance concerns for financial institutions that could provide banking services to these companies. This uncertainty creates a “whipsaw effect” that makes working with these companies untenable for most financial institutions in states where it is legal.

So what?

This uncertainty has forced cannabis-related businesses to operate mostly in cash. Cash-only businesses, especially those with a high volume of revenue, pose significant safety risks. The SAFE Banking Act would help eliminate this risk in states where cannabis is already legal.

How big is the problem?

Cannabis is legal for recreational or medical use in 31 states and the District of Columbia. Relieving legal and compliance concerns would free community banks in these jurisdictions to serve cannabis-related businesses—bringing in new customers, avoiding the need for government-owned public banks, extending our relationship-banking model to this industry, and reducing public safety concerns for everyone.

Would the SAFE Banking Act legalize marijuana?

No. Cannabis remains illegal at the federal level, and ICBA does not advocate its legalization. The SAFE Banking Act is restricted to establishing the safe harbor from federal sanctions in states where cannabis is legal.

Does the SAFE Banking Act have bipartisan support?

Very much so. The Senate version has 18 bipartisan co-sponsors, and the House version has 94. H.R. 2215 and S. 1152 are the only cannabis bills ICBA is supporting. 

So is it going to pass?

We’re working on it. ICBA has put its support behind the measure, but it is still relatively new. We’ll continue working to educate lawmakers on this critical issue and keep our nation’s community bankers apprised of any developments. Stay tuned.

Aaron Stetter is ICBA executive vice president of policy and political operations.