CANNABIS BANKING: An Uncertain Path or A Path Breaker


The current situation of cannabis banking and marijuana-related business is very uncertain as they are not yet provided with institutional benefits, which makes using banking services a hurdle to handling their proceeds. The revenues from MRBs are being condemned, and it is difficult to deposit the same with financial institutions. This is because of the partial legality of marijuana which is one of the hurdles (as it is legal in some states of the U.S.), it is a federally prohibited commodity that is one of the highly demanded commodities. There are few states in the U.S. that have legalized marijuana for medical and adult-use marijuana for recreational purposes. The bill was introduced in 2017 and since then there have been many changes that are being done to the act. It was for the very first time passed by the senate in 2019 however, the bill aimed exclusively aim at banking institutions but it ruled out provisions related to criminal and civil prosecution for all the parties and individuals and their employees if the industry is located in a legal cannabis state. Again the bill was re-introduced in 2020 but due to constraints offered by covid-19, the bill failed to pass. It was re-introduced in 2021 by a partisan group and passed the house in a SAFE Banking vote on March 18th, 2021. The bill was re-introduced in the 117th congress by a bipartisan group and is called SAFE banking plus.[1]


The SAFE banking act aims to provide financial institutions to enterprises involved in cannabis banking. Under this act, banks and other institutions, that would provide financial support and services to cannabis companies would be protected from prosecution and penalties. The crux is, it would decriminalize banking services that were conventionally of illegal nature. It has been endorsed by several state attorneys general and governors and preferably says that the Act would benefit the enterprises as it would provide financial and public safety and the cannabis business could move from its cash-only basis to a safer mode.[2] But the successful implementation of the Act is being hampered by the implications arising from it being classified as a controlled substance. Financial institutions are unsure whether the restricted substance Act, the Bank Secrecy Act and anti-money laundering laws have been broken despite the US department of justice continuing to adhere to its non-enforcement policy as originally stated in the (now revoked) Cole memorandum.[3] Although the DOJ generally does not prosecute financial institutions that provide services to cannabis-related businesses, the majority of the institutions still want assurance through clear guidelines and provisions. one of the main laws that impact cannabis banking is the Bank Secrecy Act, of 1970. The BSA requires the bank to report any suspicious activity that might lead to money laundering, tax evasion, or other criminal activities of such kind. Under this law, all the income generated through MRBs is illegal in nature and may constitute money laundering which counters the purpose of the SAFE Banking Act. The FinCEN guidelines do outline how banks and financial institutions could conduct business with the cannabis industry without triggering the BSA, but they also stipulate that in order to adhere to the Cole Memorandum’s core principles and relevant state laws, banks must conduct extensive and ongoing due diligence on any MRBs to which they wish to provide service. This type of monitoring is more extensive than typical monitoring, and it requires continual reporting through ongoing activity rather than a one-time file for a bank’s ongoing business with MRB, making it impractical for banks and other financial institutions.[4]


On the face of it, SAFE Banking Act has some direct and indirect benefits. Businesses and organizations involved in manufacturing, selling, and transporting, etc would have legal access to banking and financial services like any other legal industry. It would also encourage minority-owned cannabis businesses to get capital. A more stable industry could be expected which would also generate revenues for the government. Under the current federal restrictions, people of color do not find the cannabis industry a viable option but with the help of financial institutions, they would be able to take loans and have a kick start. They would also benefit from reduced security risks. [5]

Some acts like the Marijuana Policy Gap of 2019 and the State Cannabis Commerce Act favor Safe Banking Act. The Marijuana Policy Gap act of 2019 would exclude the legal use of cannabis from the ambit of the controlled substances Act and this would give legal access to financial institutions and resources for the cannabis industry also the State Cannabis Commerce act would not exclude MRBs from financial and banking services and would try to legalize it on the federal level to give cannabis industry financial access as other legal industries have.

SAFE Banking Act always had good support from the democratic and republican sides, a new concept has been introduced vis the “SAFE Banking Act Plus” which has the essence of the SAFE Banking Act and also addresses broad social inequalities and evils in the cannabis sector. The SAFE Banking Act Plus has not yet had a draught text made public, but information emerging from Capitol Hill indicates that the act’s potential is an exciting development because, unlike its predecessor, it will have a strong likelihood of becoming law. The SAFE Banking Act failed to pass in the Senate despite having nine Republican co-sponsors due to intra-party discontent with how the act, as drafted, had overwhelmingly favored large-industry interests. Democrats have always taken the lead in pushing for marijuana legalization on a federal level. Due to such disputes, the Senate Majority Leader has previously stated that he will not move the SAFE Banking Act forward in his chamber. The SAFE Banking Act Plus is anticipated to be different, though. The SAFE Banking Act Plus would expand the availability of loans to small businesses, affordable access to medical marijuana, etc. Although it can be seen that federal regulators have a very lax attitude towards enforcement when it comes to financial institutions banking with the cannabis industry. The SAFE Banking Act Plus would give financial institutions the much-needed federal confidence and security if it were to pass.[6]


Cannabis now has the ability to create jobs and generate generational wealth after decades of policies and practices that utilized cannabis as justification for excessive police, as well as for unauthorized searches and arrests. The negative effects of the drug war will continue to deter these communities and individuals from working in the legal cannabis business without changes like SAFE Banking. By giving them access to banking, we need to make smaller cannabis enterprises more profitable. If we don’t, communities that bear the brunt of cannabis criminalization will still face obstacles in this sector and, very reasonably, see cannabis as a risk to their future employment and financial stability. The discrepancy between state and federal marijuana laws may be eliminated with SAFE Banking. The federal government could infuse all prospective applicants with confidence by doing this, especially individuals who have long been the target of cannabis enforcement in our country.

Author(s) Name: Riddhi Agarwal (Rajiv Gandhi National University of Law)


[1] ‘SAFE Banking Act’ (Wikipedia, January 7, 2023) <>  accessed 09 January 2023

[2]‘Cannabis Stocks Tumble On Third Failure Of SAFE Banking Act (Forbes, 21 December 2022) <>  accessed 09 January  2023

[3]Andrew Howayeck & Andrew Mello ‘SAFE Banking Tweak Would Be Huge ‘Plus’ for Financial, Cannabis Industries’ (JD Supra, 22 November 2022) <>  accessed 09 January 2023

[4]James J. Black & Marc-Alain Galeazzi ‘Cannabis Banking: Proceed with Caution’ (American Bar, 06 February 2020) <> accessed 09 January 2023

[5]‘Normalize Cannabis through SAFE Banking Reform’ (Rolling Stone, 22 November 2022) <> accessed 09 January 2023

[6]Andrew Howayeck (n 3)

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