The U.S. House of Representatives recently approved the Secure and Fair Enforcement (SAFE) Banking Act. This is the fifth time the House has approved the cannabis banking reform bill since it was first introduced in 2019. This time around, the SAFE Banking Act passed as part of the National Defense Authorization Act.

Key Provisions of SAFE Banking Act

As discussed in greater detail in prior articles, the SAFE Banking Act seeks to improve access to financial services for legal cannabis businesses. Because marijuana remains illegal under the Controlled Substances Act (CSA), financial institutions providing banking services to legitimate and licensed cannabis businesses under state laws can face criminal prosecution under several federal statutes, such as "aiding and abetting" a federal crime and money laundering. In light of the liability risks, many banks are hesitant to provide services to the cannabis industry. As a result, cannabis businesses must deal exclusively in cash, which can make them targets for robberies and other types of crime.

The SAFE Banking Act seeks to increase access to financial institutions for legal cannabis businesses. Specifically, the bill would prevent federal banking regulators from:

• Prohibiting, penalizing, or discouraging a bank from providing financial services to a legitimate state-sanctioned and regulated cannabis business, or an associated business (such as a vendor or landlord providing services to a legal cannabis business);
• Prohibiting, penalizing or discouraging an insurer from providing insurance products to a legitimate, state-sanctioned and regulated cannabis business, or an associated business (such as a vendor or landlord providing services to a legal cannabis business);
• Terminating or limiting a bank’s federal deposit insurance solely because the bank is providing services to a state-sanctioned cannabis business or associated business;
• Recommending or incentivizing a bank to halt or downgrade providing any kind of banking services to these businesses; or
• Taking any action on a loan to an owner or operator of a cannabis-related business.

The federal cannabis banking reform bill also creates a safe harbor from criminal prosecution and liability, as well as asset forfeiture, for banks who provide financial services to legitimate, state-sanctioned cannabis businesses. At the same time, it also preserves banks’ right to choose not to offer those services. The protections of the SAFE Banking Act also extend to hemp and hemp-derived CBD-related businesses.

What’s Next?

The Senate must now approve the SAFE Banking Act, which has proven to be a significant challenge in the past. Nonetheless, Sen. Jeff Merkley (D-OR), who is sponsoring the SAFE Banking Act in the Senate, expressed hope that his chamber would also pass the measure as part of the larger National Defense Authorization Act. “I’m hoping we can have similar success in the Senate,” he said. “This is a moment. The House has acted once again to push for this to be successfully passed in the counterpart in the Senate, or to get it done in conference with the House language.”

There are still hurdles for the Senate to approve the SAFE Banking, including members of Sen. Merkley’s own party that are pushing for comprehensive cannabis reform rather than more incremental cannabis banking legislation. With the Senate effectively split 50-50, sponsors will need to convince several Republicans or all of the Democrats to get on board.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact Dan McKillop, Teddy Eynon, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.

This article is a part of a series pertaining to cannabis legalization in New Jersey and the United States at large. Prior articles in this series are below:

• How Does New Jersey’s Cannabis Tax Stack Up?
• Sponsors of Federal Cannabis Legalization Bill Flooded With Feedback
• The Cannabis Regulatory Commission’s Initial Rules Are Here, Now What?

Disclaimer: Possession, use, distribution, and/or sale of cannabis is a Federal crime and is subject to related Federal policy. Legal advice provided by Scarinci Hollenbeck, LLC is designed to counsel clients regarding the validity, scope, meaning, and application of existing and/or proposed cannabis law. Scarinci Hollenbeck, LLC will not provide assistance in circumventing Federal or state cannabis law or policy, and advice provided by our office should not be construed as such.