Despite being federally prohibited, the state-legal marijuana industry has been growing steadily for the past few years. Things haven’t been rosy for the often controversial sector, and the fact that marijuana is illegal at the federal level has made it challenging for businesses to operate. Admittedly, the biggest hurdle that the industry has faced is lack of access to banking.
Fearing legal retaliation from the federal government, most banking institutions avoid marijuana businesses, locking them out of accessing credit or loans and forcing them to operate on a cash-only basis. There have been numerous calls from stakeholders and advocates to rectify this situation, but according to the head of the Federal Deposit Insurance Corporation (“FDIC”), marijuana banking represents the ‘most challenging issue’ she has encountered at the agency.
“At a federal level it is still an illegal substance, and at many state levels, it’s now legal, and it’s legal to frankly bank it at a state level. And so banks find themselves caught between the federal regulatory regime and the state,” says FDIC Chair Jelena McWilliams. While there are hopes that Congress will pass a bill that gives the marijuana sector access to banking services, she tells banks that “there’s so much uncertainty in this space that as a federal regulator, I still have to say it’s illegal to bank marijuana.”
“We know we have banks that are banking marijuana businesses, and you know, we can’t bless them and say ‘go ahead and do it.’ But to the extent you’re doing it because it’s legal in your state, follow FinCEN guidance,” she says, referring to guidance issued for financial services that bank marijuana businesses by the Financial Crimes Enforcement Network (FinCEN) in 2014.
Stakeholders and advocates have been holding out hope that the historic Secure and Fair Enforcement (“SAFE”) Banking Act could still advance in Congress this year Sponsored by Rep. Ed Perlmutter, the bill would protect banks and financial institutions that serviced the marijuana industry from being penalized by federal regulators. The need for cashless transactions has been made even more urgent by the ongoing coronavirus crisis. Not only does having piles of cash around pose a security risk, but it increases the staff’s and customers’ chances of being infected by the virus.
This resulted in the inclusion of language from the SAFE Banking Act into a House-passed coronavirus relief package. It is now waiting for Congressional approval.
Industry watchers believe that sector players like Champignon Brands Inc. (CSE: SHRM) (OTCQB: SHRMF) (FWB: 496) may be wondering about what sort of extreme event will cause the federal government to finally allow banks to serve legal marijuana businesses in nearly all the states in the country.
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