House Committee Passes Bill to Protect Banks, Insurers Serving Marijuana Businesses

A House committee has advanced a bill to protect financial institutions from criminal prosecution for providing services to legal marijuana businesses.

The House Financial Services Committee voted 45 to 15 in favor of the SAFE Banking Act, which promises to improve access to banking and other financial services for legal marijuana-related businesses.

The bill includes a provision introduced by Rep. Steve Stivers, (R-Ohio), clarifying that the safe harbor from prosecution extends to the insurance industry.

Voters in 47 states and the District of Columbia have legalized some form of adult recreational and medical marijuana. However, cannabis is still considered an illegal substance under the federal Controlled Substances Act. As a result, financial institutions fear they could face federal criminal prosecution for providing banking, insurance and other financial services to state-licensed marijuana businesses.

Also, since state and federal laws are not aligned on the issue, some legal marijuana businesses operate on a cash-only basis. Advocates for the legislation argue that this situation creates a public safety risk, as well as an opportunity for tax evasion, money laundering and other white-collar crimes.

The bipartisan measure— H.R. 1595, the Secure and Fair Enforcement (SAFE) Banking Act of 2019—was authored by U.S. Reps. Ed Perlmutter (D-Colo.) and Denny Heck (D-Wash.) and co-sponsored by Reps. Warren Davidson (R-Ohio) and Stivers.

The bill now goes to the full House for consideration. The measure has 152 co-sponsors. A Senate bill is expected to be introduced in the coming weeks. Congress has failed to act on similar legislation that has been introduced since 2013.

“Regardless of our views of marijuana use, the voters have decided in states all over this country that they want recreational and medicinal markets. To continue to do nothing to protect public safety would be negligence,” said Heck.

Stivers said the committee allowed for input from both sides of the aisle, including his own amendment to give safe harbor to insurers. “This isn’t a bill about condoning marijuana use, it’s about ensuring businesses are not forced to operate in cash and open themselves up to risk, and I believe the improvements made today reflect that goal,” he said.

Some of the Republicans on the committee who voted no sought to delay the vote so that the broader issue of the legality of marijuana could be debated. Reps. Patrick McHenry (R-N.C.) and Blaine Luetkemeyer (R-Mo.) suggested a better approach would be to change the federal law that makes marijuana an illegal substance.

Backers framed the measure as a public safety initiative. “The SAFE Banking Act is about public safety, accountability and respecting states’ rights. Our federal banking laws were designed to prevent illicit activity and help law enforcement do their jobs,” said Perlmutter. “These laws need to be applied to legitimate marijuana businesses and employees in order to improve transparency and accountability and help root out illegal transactions.”

The insurance industry generally supports the bill but would prefer if the federal law were changed so that cannabis is no longer considered an illegal substance.

Wes McClelland, vice president of federal government relations at the American Property Casualty Insurance Association (APCIA), called the bill a “good first step” to giving insurers clarity. “While the bill does not address all the potential transactions that our industry is compelled by states to provide to individuals and businesses, we hope to continue working with the bill sponsors and supporters to address the larger set of issues that insurers face as more states look to legalize marijuana,” he added.

The bill also has the support of the cannabis industry, banks, credit unions and real estate developers.