The House of Representatives passed legislation Wednesday to protect financial institutions that serve marijuana businesses in states where the substance is legal.
Federally insured depository institutions are prohibited from offering financial services to such businesses because pot is illegal under federal law, forcing the companies to deal primarily in cash.
Recreational cannabis use is legal in 11 states and Washington, D.C., and medicinal use is legal in another 22 states.
The bill would, in part, prevent federal regulators from penalizing institutions that issued loans to or otherwise transacted with legitimate cannabis businesses.
“Thousands of employees, businesses and communities across this country have been forced to deal in piles of cash because of the conflict between state and federal law,” said Rep. Ed Perlmutter (D., Colo.), lead sponsor for the bill, known as the SAFE Banking Act, short for Secure And Fair Enforcement.
The bill passed in the House, 321-103. Although the bill’s Senate companion has bipartisan co-sponsors, its passage in the chamber is uncertain.
In July, the Senate Banking, Housing and Urban Affairs Committee held a hearing on the banking-related challenges cannabis businesses face. The committee’s chairman, Sen. Mike Crapo (R., Idaho), told The Wall Street Journal on Tuesday that, though he thought some concerns raised at that hearing were worth looking into, he hoped similar legislation would be able to get a Senate vote.
Kevin Murphy, chief executive officer of cannabis company Acreage Holdings, said the legislation was an important step toward transparency and safety for the industry. The company, whose board of directors includes former House Speaker John Boehner, a Republican from Ohio, and former Massachusetts Republican Gov. William Weld, owns cannabis growing, processing and distribution operations, and operates in 20 states.
Mr. Murphy said the legislation was even more important to smaller entrepreneurs who lack the institutional connections and financial heft of his company. “There are folks in this business that are paying taxes to the IRS with duffel bags full of cash, millions of dollars,” he said.
“By approving the SAFE Banking Act, more than two-thirds of the House affirmatively acknowledged that legalization and regulation of the marijuana marketplace is preferable to criminalization,” said Justin Strekal, political director at the National Organization for the Reform of Marijuana Laws.
Besides protecting banking institutions’ ability to interact with cannabis businesses, the bill also requires federal regulators to issue guidance to financial institutions regarding hemp, a variety of the cannabis plant used for its fiber, and businesses that sell hemp-derived cannabidiol, or CBD, a chemical marketed as a painkiller.
Hemp was recently reclassified to separate it from marijuana, which has higher levels of THC, the main psychoactive chemical in pot.
The legislation was backed by organizations such as the American Bankers Association. In a letter this week to House Speaker Nancy Pelosi (D., Calif.) and House Minority Leader Kevin McCarthy (R., Calif.), the association’s president Rob Nichols urged the passing of the bill.
Mr. Nichols said Wednesday that the bill would help banks meet community needs, reduce cash-motivated crimes and make tax collection more efficient. “It will also ensure that businesses with indirect ties to the cannabis industry—including vendors, utility companies and law firms—won’t be needlessly forced out of the financial system,” Mr. Nichols said.