Delaware Democratic Gov. John Carney signed legislation last week that grants legal protections to financial institutions that provide services to cannabis-related businesses licensed or registered under state law.
House Bill 355, sponsored by Rep. Ed Osienski and Sen. Trey Paradee, was crafted in partnership with State Treasurer Colleen Davis. The legislation clarifies that banks, credit unions and other financial entities can safely work with cannabis cultivators, distributors and retailers without risking criminal liability.
“Banks and credit unions are hesitant to serve the marijuana industry because of concerns regarding federal prosecution or penalties since marijuana remains illegal under federal law,” Davis said when the bill was introduced in March.
“H.B. 355will provide state-level legal protection, and a clear legal framework for banks, payment processors, and other financial service providers to follow,” Davis said. “It can also ease concerns about federal enforcement and regulatory compliance among these businesses—since it allows them to demonstrate to federal agencies that they’re following a clear legal framework, ultimately leading to a safer and more transparent marijuana industry.”
While some regional and local banks are willing to take on the risk of working with cannabis businesses, larger financial institutions typically steer clear of the industry due to the lack of clarity from Congress regarding how banks can service cannabis-related businesses.
While the current rendition of cannabis banking legislation in Washington—the Secure and Fair Enforcement Regulation (SAFER) Act—aims to provide this clarity, the federal legislation has remained stagnant under Senate Majority Leader Chuck Schumer, D-N.Y., since the Senate Banking Committee approved the bill in September 2023.
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While some industry stakeholders remain hopeful that cannabis rescheduling under the current White House administration’s process to reclassify the plant from a Schedule I to Schedule III drug under the Controlled Substances Act (CSA) will instill confidence in banks to service the industry, rescheduling alone would not move that needle, according to legal experts.
The legal risks of financial institutions serving cannabis businesses under a Schedule III status would persist, Cliff Stanford, partner at Alston & Bird, told Cannabis Business Times.
“I don’t think that would move the needle sufficiently,” Stanford said of rescheduling. “I think that because of the Bank Secrecy Act obligations of the bank and the heavy penalties that bank regulators can bring for violations of that law—they take it very seriously—is that without certainty under federal law as to what bank regulators will do if they bank state-legal and Schedule III federal-level marijuana businesses, I think there’s still going to be a question in the air in terms of how far banks would be willing to go to provide banking services.”
Federal anti-money laundering laws criminalize handling proceeds from cannabis manufacturing and sales in violation of the CSA, he said. This means financial institutions will still view the cannabis industry as a risk without legislation like the SAFER Banking Act to provide clarity.
“I don’t know that moving from Schedule I to Schedule III is going to change the picture,” Stanford said.
In Delaware, H.B. 355 represents a state-level version of safe banking for the cannabis industry.
Specifically, the legislation “clarifies that banks, credit unions, armored car services, and providers of accounting services are not subject to prosecution under Delaware law merely by providing lawful services to licensed businesses engaged in the production, distribution and sale of cannabis in Delaware.”
With Carney’s signature, the law will help ensure that Delaware’s licensed cannabis businesses will have access to financial and accounting services ahead of the state’s adult-use cannabis program rollout. Delaware could launch dispensary sales for those 21 and older as soon as March 2025 thanks to the governor signing separate legislation in July to create a pathway for existing medical cannabis companies to transition to adult-use operations.
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Ensuring that the state’s forthcoming adult-use industry has access to necessary financial and accounting services was a reason for Delaware Marijuana Commissioner Rob Coupe to stand behind H.B. 355.
“The inability to access traditional banking services presents a serious challenge for Delaware’s marijuana businesses,” Coupe said earlier this year. “Cash-intensive operations leave the businesses vulnerable to theft and other crimes, and present additional obstacles in their efforts to comply with tax laws.”
Key provisions of H.B. 355 signed Carney include:
Protection: Provides state-level legal protection, thereby reducing banks’ fear of prosecution or penalties.Enables Secure Transactions: Allows marijuana businesses to utilize traditional banking methods, eliminating the dangers and inefficiencies associated with managing large amounts of cash.Boosts Local Economy: Facilitates investment and growth within the Delaware marijuana industry, leading to increased revenue and job opportunities.Enhances Safety: Promotes greater safety for retailers and their customers, as cash-intensive activity is more prone to theft, robbery and violence.Competition: Encourages more financial-related service providers to enter the legal marketplace, which will result in more competition, lower prices, improved services, and potentially decrease the amount of marijuana business taking place within the illicit market. The legislation will protect financial institutions such as banks and credit unions under state law. Read More