House passes bill to protect cannabis industry access to banks, credit unions

The House passed a bill Wednesday to give banks and credit unions legal cover to serve the cannabis industry even while the drug remains federally banned.

The bill, dubbed the Secure and Fair Enforcement (SAFE) Banking Act, easily passed the House by a vote of 321-103, with 229 Democrats, 91 Republicans and Rep. Justin Amash (I-Mich.) supporting the measure. Just one of the 103 votes against the measure came from a Democrat, Rep. Terri Sewell of Alabama.

While the bill faces an uncertain future in a Republican-held Senate that is skeptical of easing drug laws, the House’s approval marks a major step toward settling the vast differences between federal and state cannabis regulation.  

“American voters have spoken and continue to speak, and the fact is you can’t put the genie back in the bottle,” said Rep. Ed Perlmutter (D-Colo.), the bill’s lead House sponsor. “Prohibition is over. Our bill is focused solely on taking cash off the streets and making our community safer.”

Even though cannabis is illegal under federal law, 33 states have legalized medical or recreational use of the drug. Another 14 allow residents to use nonintoxicating cannabidiol products, leaving just three states without any legally approved cannabis use. 

The rapid state-level approval of cannabis has created a multibillion-dollar industry in the U.S. but one with fraught access to the financial services industry. 

Banks and credit unions have largely avoided serving cannabis firms to avoid violating federal anti-money laundering and illicit finance laws. Such infractions could cost a bank or credit union millions of dollars in fines or legal fees and even their federal charter to operate nationwide.

Cannabis firms frozen out of the financial sector are often forced to operate with cash only, which creates high costs, logistical headaches and safety threats. The obstacles also extend to employees of cannabis dispensaries or cultivators, with or without financial stakes in the company.

“As a result, they sit on large pools of cash that make them a magnet for violent robberies,” said Rep. Steve Stivers (R-Ohio), a bill co-sponsor who opposes cannabis legalization.

“The SAFE Banking Act will make our community safer by getting cash off the streets and into regulated financial institutions so we can root out fraud and other illegal activity,” he added.

The bill seeks to limit these risks and challenges by prohibiting federal regulators from penalizing banks or credit unions that serve cannabis businesses that comply with state laws. 

The measure also attempts to protect other firms that serve cannabis businesses — such as retailers, vendors and contractors — with legal clearance as long as the transactions are not otherwise illegal.

The bill was co-sponsored by a coalition of 180 Democrats and 26 Republicans, ranging from staunch progressives in favor of cannabis legalization to conservatives who urged respect for state-level decisions. It was passed by the House Financial Services Committee in March by a 45-15 vote.

Democrats are widely supportive of easing cannabis laws, making the bill an easy sell to the House majority. The endorsement of major financial sector lobbying groups, including the American Bankers Association, the Independent Community Bankers of America, and the Credit Union National Association, helped secure broad support for the bill.

The measure’s sponsors also sought to rally Republicans around the bill with amendments to include longtime GOP priorities. 

The bill bans bank regulators from closing accounts at firms unless they have reason to suspect illegal activity. 

It also expands the protections provided by the bill to hemp growers and firms, which is seen as key to securing the support of Senate Majority Leader Mitch McConnell, (R-Ky.), whose home state is the top U.S. hemp producer.

But a wide swath of House Republicans remained opposed to the measure, insisting that Congress should first narrow the legal gulf between federal and state cannabis laws.

“We do not fully understand the sweeping implications of this legislation,” said Rep. Patrick McHenry (R-N.C.). “What this legislation does is provide a half answer to a much larger problem than just banking.”

Democrats who supported the measure also urged Congress to tackle broader economic and criminal justice issues linked to cannabis legalization. Liberal lawmakers and criminal justice reform advocates have backed easing punishment for those jailed for cannabis-related crimes and steering profits to communities harmed by disproportionate enforcement of drug laws.

“Let me be clear: It is long overdue for Congress to address the unjust criminalization of marijuana use,” said Rep. Maxine Waters (D-Calif.), chairwoman of the House Financial Services Committee.

“This bill is but one important piece of what should be a comprehensive series of cannabis reform bills.”

Updated at 6:53 p.m.