Yesterday the House Financial Services Committee voted 45-15 (with significant bi-partisan support) to advance the SAFE (Secure and Fair Enforcement) Banking Act for a vote before the full House of Representatives, which, if enacted, will enable banks and insurance companies to service state-legal cannabis businesses.
Versions of the SAFE Act have been introduced since 2013, but this version has 152 co-sponsors. Because cannabis is federally illegal, most financial institutions have been reluctant to work with state licensed cannabis businesses for fear of violating federal law and federal criminal prosecution. That has left the cannabis industry to operate largely on a cash-basis, which creates serious public safety risks for cannabis companies and their employees. The irony is that federal banking laws designed to create transparency and to prevent money laundering have forced the cannabis industry to avoid the federally regulated financial system, which itself leads to opportunities for tax evasion and money laundering.
The SAFE Act addresses that problem by prohibiting Federal banking regulators from taking action against financial institutions that service state licensed cannabis businesses. The SAFE Act also will allow commercial lenders to provide business loans to cannabis companies and remove lenders’ fears of forfeiting collateral for cannabis related loans. The current draft of the bill also provides financial protections for businesses that do business with state-licensed cannabis companies, including accountants, lawyers, real estate companies and other vendors.
Pashman Stein Walder Hayden is carefully monitoring developments in New Jersey and federally with respect to marijuana legislation and will be available to help its clients navigate the sure-to-be complex regulatory framework of this potential business frontier.