The marijuana industry has become big business in the U.S. With 36 states offering legalization for medicinal, recreational, or both, legal sales reached $17.5 billion in 2020. Now, the Secure and Fair Enforcement (SAFE) Banking Act hopes to create a pathway for banks to become part of the commercial activity. Here’s a closer look at what’s involved.
What Is the SAFE Banking Act?
Currently, marijuana is still illegal at the federal level. As a result, banks can face federal legal issues if they service marijuana-related businesses, such as revoking deposit insurance. This arrangement pushes many financial institutions to avoid working with such companies, forcing them to operate as cash-only.
The primary goal of the legislation is to protect banks from federal regulators. The SAFE Banking Act also provides liability protection to institutions that serve legal companies in the cannabis industry as well as hemp producers and CBD manufacturers and sellers.
The bill was first introduced back in 2017 but didn’t gather traction until 2019. After a failure in the U.S. Senate, the bill was updated and reintroduced in 2021. It passed the House with bipartisan support in April 2021 and is currently waiting to make it through the Senate.
How It Will Impact Banks
If the SAFE Banking Act is successful in Congress and signed by the President, it will open up new opportunities for banks in states that have legalized marijuana in some form or another. As long as the business is operating legally, the institution can service them without fear of violating federal law. As such, they can provide commercial financial services, including checking and loans.
However, banks aren’t required to service cannabis businesses. If they feel uncomfortable or believe it would dissatisfy their current client base, they can still refuse to provide services.
Based in Franklin County, The Bankers’ Bank of Kentucky provides financial services to community banks across Kentucky, West Virginia, Ohio, Tenessee, Illinois, and Indiana. From loans to mobile banking, their experienced account executives provide personalized guidance tailored to each institution’s needs. Browse the operational services online and speak with a knowledgeable team member at (800) 248-3229.