Why Don’t Banks Accept Cannabis Funds?

A lack of traditional banking options has plagued the cannabis industry since Colorado first legalized adult-use cannabis through a constitutional amendment on November 6, 2012 and implemented on January 1, 2014. Despite the continued momentum of cannabis legalization (both medical and adult-use), the traditional banking system remains largely off-limits to the industry due in part to marijuana being illegal on a federal level under the Controlled Substances Act.

Since most banks are insured by the Federal Deposit Insurance Corporation (FDIC), federal prohibition bars these federally insured banks from deposing cannabis funds and/or offering financial services to cannabis companies. As such, the industry has relied on cash (not “safe”) and a patchwork of credit unions (thank you to Colorado native Sundie Seefried for pioneering this effort).

Enter the Secure and Fair Enforcement (SAFE) Banking Act, first introduced in Congress in 2017. The SAFE Banking Act, generally, sought to prohibit regulators from terminating or limiting either deposit or share insurance of a financial institutions for doing business with cannabis companies. It also sought to prohibit regulators from barring financial institutions from offering financial services to these companies. The 2017 SAFE Banking Act never advanced to a full vote or hearing in either chamber of Congress.

The SAFE Banking Act was revived in 2019 where it passed the House of Representatives only to die in the Senate.

In 2021, the SAFE Banking Act was again introduced in Congress and passed the House of Representatives with bipartisan support. After the House of Representatives passed the 2021 version, Aaron Smith, co-founder and chief executive officer of the National Cannabis Industry Association, noted that the act “will improve the lives of the more than 300,000 people who work in the state-legal cannabis industry … [and] will also help level the playing field for small businesses and communities with limited access to capital.” The 2021 SAFE Banking Act also seeks to amend the reporting requirements related to Suspicious Activity Reports (SARs) and require the Financial Crimes Enforcement Network (FinCEN) to issue guidance on transactions related to cannabis-related businesses that is “consistent with the purpose and intent of the SAFE Banking Act of 2021 and does not significantly inhibit the provision of financial services” to cannabis companies.

The 2021 SAFE Banking Act has garnered nationwide support including, but not limited to, support from the National Association of State Treasurers and Governors from 21 states and territories, the American Bankers Association, Americans for Tax Reform, Credit Union National Association, Independent Community Bankers of America, Law Enforcement Action Partnership, the Electronic Transactions Association, the Cannabis Trade Federation, the National Cannabis Roundtable, Mid-Size Bank Coalition of America, the Real Estate Roundtable, the National Association of Realtors, and various other U.S. trade associations, including the American Land Title Association, American Property Casualty Insurance Association and the Reinsurance Association of America.

The Safe Banking Act of 2021 would finally allow federally insured financial institutions to work with cannabis companies without fear of prosecution and/or regulatory penalties. It’s far past time for the Senate to approve this version of the Safe Banking Act and to bring cannabis companies out of the shadows and into the United States banking system.

This article was originally published by Marijuana Venture.


Dean Richardson

Chair, Litigation Section

Dean Richardson