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Cannabis banking bill heads to U.S. House for a vote

Jack Jacobson September 19, 2019

Next week, the U.S. House of Representatives will vote on H.R. 1595, the Secure and Fair Enforcement (SAFE) Banking Act. This is a long-anticipated step forward, as there has not been a stand-alone vote on cannabis legislation in Congress since the Controlled Substances Act prohibited marijuana use in 1970. The bill will be brought to the floor under suspension of the rules, a procedure used to expedite the legislative process by limiting floor debate and prohibiting floor amendments. Under this rule, two-thirds of the House, or 290 votes, are required to pass a bill; sponsors currently anticipate approximately 320 votes in support of the legislation.

Prior to the bill advancing to the floor, two provisions have been added in an effort to shore up Republican support. This includes addressing regulations surrounding industrial hemp in the 2018 Farm Bill and expanding banking protections to cover insurance companies, following a last-minute push by major insurance associations. A third provision under consideration would end the Obama-era program Operation Choke Point, which Republicans claim targets certain industries out of political motivation.

That a cannabis bill would be considered in an expedited environment more characteristic of non-controversial bills shows how much the political landscape has changed with regard to cannabis in recent years. The Republican-led Senate held a hearing on cannabis banking in July, and Senate Banking Chair Mike Crapo (R-ID) said that his committee will vote before the end of the year on a version of the SAFE Banking Act he and his staff are drafting, which has not been released.

Legislation similar to the SAFE Banking Act has been introduced in every Congress since 2013, but efforts picked up pace early in this Congress, with Democrats controlling the House. The House Financial Services Subcommittee on Consumer Protections and Financial Institutions held a hearing in February titled, “Challenges and Solutions: Access to Banking Services for Cannabis-Related Businesses.” On March 7, Representatives Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH), and Warren Davidson (R-OH) introduced the SAFE Banking Act of 2019. On March 28, the House Financial Services Committee reported the bill favorably by a strong bipartisan vote of 45-15; since that vote, several Republicans who voted “no” in Committee have reversed course and are expected to support passage next week.

Passage of the SAFE Banking Act would mark significant progress in harmonizing federal and state cannabis law. Federal banking regulators would be prohibited from the following actions with respect to a cannabis-related legitimate business: 

  • Threatening or limiting a depository institution’s access to the Deposit Insurance Fund; 
  • Discouraging, prohibiting, or penalizing depository institutions; 
  • Taking any action against a loan made to a covered business; or 
  • Forcing a depository institution to halt providing any kind of banking services. 

Additionally, any depository institution and/or its employees would be immune from federal prosecution or investigation solely for providing banking services to a covered business. 

A covered “financial product or service” refers to the following: 

  • Providing and/or extending credit and servicing such loans;
  • Extending or brokering leases of real property;
  • Engaging in depository-taking activities, transmitting or exchanging funds on behalf of a consumer;
  • Selling, providing, or issuing stored value or payment instruments;
  • Providing check cashing, check collection or check guaranty services;
  • Providing payments or other financial data processing products or services; or
  • Collecting debt related to any consumer financial product or service.

The legislation covers a "cannabis-related legitimate business" which holds and maintains a license from a state or local government to engage in manufacturing, growing, or producing, as well as any business that handles, sells, transports, displays or distributes, cannabis or cannabis products. It also adds protections for ancillary businesses, insurance providers, electronic payment services and de novo banks.

The bill also requires a Government Accountability Office report on diversity and inclusion and requires that federal banking regulators gather data on diversity and inclusion that will be reported annually to Congress.

Jack Jacobson is an Advisor with Thompson Coburn Lobbying & Policy. Jack has been active on state and federal cannabis issues since the early days of state legalization. In 2019, he launched the Safe and Responsible Banking Alliance (SARBA), a coalition of financial services and non-cannabis business interests advocating for federal cannabis banking reform legislation.

Thompson Coburn advises clients on state laws governing the business of cannabis to facilitate compliance with those state laws. Federal laws concerning cannabis currently conflict with state laws in states that have legalized cannabis or possession of cannabis. Although federal enforcement policy may at times defer to these states’ laws and not enforce conflicting federal laws, interested businesses and individuals should be aware that compliance with state law in no way assures compliance with federal law, and there is a risk that conflicting federal laws may be enforced in the future. In addition to this Cannabis-specific note, readers should review Thompson Coburn’s Conditions of Use / Disclaimers page containing other important information.