RLR Management Consulting

Banking Cannabis: The Legal Status

Cannabis is legal in 33 States in the Country.  11 of those States have legalized both recreational as well as medical use and the issue of legalization will appear on more State ballots in 2020. At the Federal level, Cannabis still remains illegal and, despite almost certain passage of an act in the House of Representatives in 2019 to legalize Cannabis, mirror legislation is likely doomed under this Senate.

However, de-scheduling Cannabis as a Federally prohibited narcotic is a different matter than providing State’s the autonomy to legalize and regulate the cannabis industry according to the wishes of their own voters. The primary problem with a Federal “hands-off” approach when it comes to State’s approving and self-regulating the Cannabis Industry is when it comes to the intersection of federal banking laws and regulations, which all banks need to adhere to in order to be a member of the FDIC.

Now there is real hope that banks, and more importantly bank regulators, will be given clear guidance from Congress on allowing banks to safely provide financial services to the industry.  In September of this year, the House of Representatives (By an over-whelming bipartisan vote) passed the Secure and Fair Enforcement Banking Act (SAFE Banking),  which is the first hurdle to give Federal banking regulators the authority to write the guidance and rules that will give FDIC member banks the legal framework for banking the industry. The bill still has to pass the Senate and its fate there is still murky.  While it has been reported that the bill clearly has the necessary votes in the Senate, has two conservative sponsors in Senators Crapo and Gardner, and the President has indicated he would sign it, that offers no compelling certainty that historical bill opponent, Senate Majority Leader Mitch McConnell, will bring it to the floor.

Still, with two-thirds of American voters (according to Pew Research) supporting legalization of Cannabis, one would think that it is an inevitability that the bill gets passed and it may be a political wedge issue the Republicans want to avoid in 2020.