With a Senate committee set to take up the issue of debanking next week, congressional researchers have released a report detailing the subject—while making a point to address how the marijuana industry’s financial services access problem “sits at the nexus” of a state-federal policy conflict that complicates the debate.
The Congressional Research Service (CRS) analysis explains the reasons a bank might terminate a given account, including suspicion that the client is engaged in illegal activity. And for companies working in or around the cannabis industry in a state that has legalized it, the bank’s risk assessment is often influenced by the fact that marijuana remains federally prohibited.
“Although most banks are state-chartered, every federally insured bank has a primary federal regulator, and generally these regulators expect banks to avoid banking with clients that violate federal law,” CRS said. “One example is cannabis businesses.”
“Cannabis is legal in several states but is banned at the federal level. Thus, a bank chartered in a cannabis-legal state may be in a position to provide banking services to a company operating legally under state law, but it could potentially violate federal law,” it says. “Thus, banks may choose not to bank with companies in industries that are legal only at the state level due to potential bank exposure to legal risk.”
CRS emphasized that “cannabis banking sits at the nexus of this issue, where state-chartered banks are in position to provide banking services to companies that operate legally under state law but illegally at the federal level.”
“Because each commercial bank has a primary federal regulator, this creates conflict for federal banking agencies to avoid condoning federally illicit activity while also avoiding influencing commerce at the state level that exceeds the prudential authority of the regulators. Further, some regulators have issued enforcement actions related to cannabis banking.”
The report also notes that Congress has attempted to address the cannabis banking issue with a bipartisan bill, the Secure and Fair Enforcement (SAFE) Banking Act, that would protect financial institutions from being penalized by regulators simply for working with the marijuana industry.
The Senate Banking Committee passed a version of that legislation in September 2023 under Democratic control. And stakeholders are holding out hope that the issue will be raised again in the panel when it takes up debanking issues next week.
However, while marijuana workers and industry associations have been reaching out to the committee with their stories of losing bank accounts over their association with cannabis, it’s unclear if that will compel Banking Committee Chairman Tim Scott (R-SC) to proactively address it, as he opposed the SAFE Banking Act and stressed that the upcoming hearing will focus on “legal” enterprises.
The SAFE Banking Act is expected to be filed again this session—but that introduction is “not imminent” as some recent reports have suggested, a spokesperson for the GOP House sponsor of the last version told Marijuana Moment last week.
“While introduction is not imminent, we hope to have a firmer update on timing within the coming weeks,” the staffer for Rep. Dave Joyce (R-OH) said.
With Republicans now in control of the House and Senate—and leadership having historically opposed even modest cannabis legislation, including the banking bill—there are open questions about the prospects of advancing marijuana reform this session.
However, some are holding out hope that a measure to allow cannabis industry banking access could move, especially given President Donald Trump’s endorsement of the proposal on the campaign trail.
Separately, the Government Accountability Office (GAO) announced last month that it’s convening focus groups comprised of marijuana businesses to better understand their experiences with access to banking services under federal prohibition.
The industry remains frustrated with the lack of progress on the cannabis banking issue under the last administration.
A Senate source told Marijuana Moment last month that Republican House and Senate leadership “openly and solely blocked” then-Senate Majority Leader Chuck Schumer’s (D-NY) attempt to include the bill in a government funding bill as the session came to a close.
Sens. Elizabeth Warren (D-MA) and Tommy Tuberville (R-AL) had challenged the idea that there was enough GOP support for the SAFER Banking Act to pass on the Senate floor during the lame duck session.
Warren accused certain Republican members of overstating support for the legislation within their caucus, while also taking a hit at Trump for doing “nothing” on cannabis reform during his time in office as he makes a policy pivot ahead of the election by coming out in support of the marijuana banking bill and federal rescheduling.
Sen. John Hickenlooper (D-CO) also recently argued in an interview with Marijuana Moment that the main barrier to getting the marijuana banking bill across the finish line is a lack of sufficient Republican support in the chamber. And he said if Trump is serious about seeing the reform he recently endorsed enacted, he needs to “bring us some Republican senators.”
Prior to becoming House speaker, Rep. Mike Johnson (R-LA) consistently opposed cannabis reform, including on incremental issues like cannabis banking and making it easier to conduct scientific research on the plant.
Meanwhile, on the one-year anniversary of a Senate committee’s passage of the SAFER Banking Act in September, the Congressional Budget Office (CBO) released an analysis on the economic impact of the reform, including the likely increase in federally insured deposits from cannabis businesses by billions of dollars once banks receive protections for servicing the industry.
Separately, the CEO of the financial giant JPMorgan Chase said recently that the company “probably would” start providing banking services to marijuana businesses if federal law changed to permit it.
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The post Marijuana ‘Sits At The Nexus’ Of Debanking Conflict Between Federal And State Laws, Congressional Researchers Say Ahead Of Senate Hearing appeared first on Marijuana Moment.
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