Consumer Finance Insights
October 4, 2019

House Passes Cannabis SAFE Banking Act

On September 25, 2019, the House of Representatives passed the Secure and Fair Enforcement (SAFE) Banking Act by a 321-103 vote with bipartisan support. H. R. 1595, 116th Congress (2019).  The SAFE Banking Act “creates protections for depository institutions that provide financial services to cannabis-related legitimate businesses.”  This is the first stand-alone cannabis bill voted on in Congress.

The SAFE Banking Act provides several safe harbors for financial institutions in order to ensure access to financial services to cannabis-related legitimate businesses.  For instance, it prohibits federal banking regulators from discouraging banks from providing services to legitimate marijuana businesses.  It prohibits federal banking regulators from incentivizing banks not to offer financial services on the basis that the account is involved in a cannabis-related legitimate business.  Further, federal banking regulators are also prohibited from limiting deposit insurance solely on the basis that the bank provides or has provided financial services to a legitimate cannabis-related business.

This Act aims to eliminate gray areas that arise where the cannabis-related businesses operate legitimately in their individual states, but are prevented from using traditional financial services as the drug is prohibited at a federal level.  This gray area has forced legitimate cannabis-related businesses to largely operate as “cash only,” which the bill’s supporters consider a public safety concern due to the personal safety and security risks that follow the handling of large amounts of cash.  The SAFE Banking Act’s supporters also hope that by removing the financial obstacles, the transparency in the industry would also improve.

The passage of this bill is significant because if the SAFE Banking Act became law, it would protect financial institutions’ ability to serve legitimate cannabis-related businesses.