For nearly a decade, financial institutions operating in states with regulated cannabis markets (whether medicinal or recreational) have struggled with their ability to offer banking services to entities legally operating within their respective state. With only eleven states remaining that prohibit either medicinal or recreational use of cannabis, this issue has only grown more prevalent.
The Conference of State Bank Supervisors (CSBS) has now weighed in, sending letters to both the United States House of Representatives and the Senate, stressing the importance of providing safe harbor for financial institutions offering financial products and services to cannabis or cannabis ancillary businesses under the proposed Secure and Fair Enforcement (SAFE) Banking Act.
In the letters, CSBS CEO James M. Cooper focused on the importance of the regulatory clarity the SAFE Banking Act would provide to the financial services industry. Cooper further noted the SAFE Banking Act would address public safety concerns that result from state-compliant marijuana businesses’ lack of access to financial services. CSBS’s letters also request and encourage the House and Senate to extend the safe harbor to all financial services, including state-licensed money transmitters used by business nationwide to transfer funds from one party or business to another and accept customer payments for consumer purchases. According to the letters, failing to include these service providers would perpetuate the adverse impacts of regulatory uncertainty surrounding cannabis financial services, not the least of which is the significant public safety issues associated with cash-only operations.
The SAFE Banking Act has historically had success in the U.S. House, having been passed in the House six times as of the date of this article, and most recently in February 2022, while continuing to stall in the Senate. Whether CSBS’s letters offering public and forceful support of the SAFE Banking Act will ultimately contribute to the eventual success of the bill in the Senate is an issue well worth following. However, under the current regulatory framework, financial institutions will continue to confront complex regulatory issues and remain in an awkward limbo when faced with customers seeking cannabis related financial products and services from companies operating in compliance with state (and even federal, with respect to hemp and cannabinoids derived therefrom) cannabis rules and regulations.