Cannabis companies in the US lack access to banking and other financial services because the drug is federally illegal. That could soon change through new legislation or thanks to broader legalisation efforts backed by the Democratically-controlled Senate.
In April, the US House of Representatives passed the SAFE Banking Act, which would allow banks to provide services to cannabis companies in states where it is legal. The legislation now faces an uncertain fate in the Senate.
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The SAFE Banking Act intends to address the gap between a cannabis company’s legal standing in particular states and the current federal prohibition of marijuana sales and usage, as it relates to banking.
There are obvious problems in restricting banking access to legal cannabis companies, which causes them to work with a tremendous amount of cash.
Prominent trade groups, such as the Credit Union National Association, the American Bankers Association, the Independent Community Bankers of America, and the National Association of State Treasurers are all proponents of the SAFE Banking Act.
Republicans, on the other hand, are either wary or unsupportive.
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By GlobalDataThe current legal landscape
As the legal landscape currently stands, everybody is at risk. For banks, working with legal cannabis companies either raises severe compliance regulations or makes them vulnerable to federal punishment.
While cannabis companies struggle to obtain the loans necessary to grow their businesses or launch new ones.
Under federal law, marijuana is classified as a Schedule I drug. These are drugs that have no accepted medical use in the United States and are considered addictive or dangerous.
Because of this, most financial institutions are reticent to open bank accounts for cannabis businesses.
Without banks, state-compliant cannabis businesses can’t accept credit cards, acquire loans, set up deposit accounts, write checks, run payroll, or pay taxes.
All this currently enables money-laundering, presents a safety hazard, pro-cannabis advocates argue.
The SAFE Banking Act
The SAFE Banking Act solves this conflict by expressly allowing for cannabis companies to bank cannabis revenues.
Further, it allows the industry to become exposed to other banking services which to date have been unavailable – lending, lines of credit, and other investment-related tools.
More importantly, it can open the door for large-scale institutional banks to evaluate the process for underwriting and servicing publicly-traded cannabis companies on the NASDAQ and NYSE.
What the law would do
The SAFE Banking Act would provide that federal regulators shall not interfere in the actions of a depository institution dealing with state-legal cannabis businesses.
It would protect financial institutions that choose to do business with cannabis companies in legal states.
It would provide clarity so that federal regulators cannot interfere with or punish financial institutions for working with legitimate cannabis-related businesses.
