Weston Hurd logo

SAFE Banking Act - A Historic Marijuana Reform Bill

in Business, News

The U.S. House of Representatives passed a standalone marijuana reform bill for the first time in history on Wednesday, September 25, 2019. Sponsored in the House by Rep. Ed Perlmutter (D-Colo.) and in the Senate by Sen. Cory Gardner (R-Colo.), the SAFE Banking Act of 2019 grants safe harbor for banks and credit unions who provide financial services to cannabis-related businesses that are legal under state law.
To date, the use of marijuana for medical purposes and/or recreational purposes by adults has been approved in 33 states and the District of Columbia. Another 14 states permit the use, sometimes restricted to those with a prescription, of CBD oil. But under federal law, it remains illegal under the Controlled Substances Act to grow, transport, distribute, sell, possess or use marijuana.

This disparity between federal and state law creates several complications, including for the financial services industry. Cannabis businesses may act completely in accordance with local state law, but federal law dictates that banks, credit unions, insurance companies, credit card providers and other financial firms who provide services to those businesses, their subcontractors or even their employees could run afoul of a number of federal criminal statutes, find themselves potentially liable for large regulatory sanctions or even lose their deposit insurance from the Federal Deposit Insurance Corporation(FDIC). Luckily, this problem does not persist with credit unions because the National Credit Union Administration (NCUA) recently declared that credit unions in states where marijuana is legal won’t be sanctioned for providing services to cannabis-related businesses as long as they follow money laundering, Bank Secrecy Act, safety and soundness and other rules.

As a result, many cannabis-related businesses operate as cash-only, finding themselves locked out of basic business needs like the ability to maintain checking accounts, administer payroll, access short- or long-term credit or even pay their taxes. Though the number of lenders who serve the industry is growing, it has been estimated that as much as 70 percent of cannabis-related businesses have no relationship with a lending institution. Dealing in that much cash poses other public safety problems. A 2017 report from the Wharton Public Policy Initiative found that half of all cannabis dispensaries have been robbed or burglarized.

The SAFE Banking Act ensures that financial services firms who serve legitimate cannabis-related businesses could not be penalized, forced to halt services or denied access to their deposit insurance fund (the FDIC for banks and thrifts, the National Credit Union Administration Share Insurance Fund for credit unions) for doing so. The bill provides explicit safe harbor for institutions to provide checking, savings, credit, debt collection, payments and real estate brokerage services, among others, to the cannabis industry.

Although passage through the House is only one (historic) step, it appears to be a harbinger of things to come. If signed into law, the SAFE Banking Act would bring the cannabis industry out of the shadows as far as financial services are concerned.


Matthew C. Miller is a corporate and business litigation partner at Weston Hurd LLP. Matt represents small and middle-market companies regularly advising them on employment, creditors’ rights, business transactions, and real estate matters. Since 2015, he has been named an Ohio Rising Star in Business Litigation by Thomson Reuters. Matt can be reached at 216.687.3236 or mmiller@westonhurd.com