Cannabis banking regulation in 2024
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Major legislation hangs in the balance due to the uncertainties of the 2024 presidential election, including key regulatory shifts affecting finance and banking. Cannabis banking—banking services designed for the legalized cannabis industry—is one such locus of uncertainty.
According to Paul Dunford, VP of Knowledge at FL-based Green Check, a cannabis banking platform, some substantial regulatory scaffolding already exists. The industry can use two FinCEN guidance documents—one from 2014 and another from 2020—to organize cannabis banking operations.
Dunford said that, while this guidance is relatively comprehensive, financial institutions could benefit from a unified exam guide drafted by the Federal Financial Institutions Examination Council (FFIEC), so that “every financial institution could build a program with… the test prep book in their hand.”
But Dunford further noted that FFIEC leaders are reluctant to comment on cannabis banking because of its relatively unwritten federal status, and its competent management on a state level. “There’s this kind of ‘don't poke the bear’ [mentality], don't make the federal government say no, but everybody knows that the mechanism is working,” he said.
Although Green Check—and other industry players—don’t expect any further activity on the SAFER Banking Act before the 2024 election, they do see cannabis banking as a relatively bipartisan topic. The Agricultural Improvement Act, for example, which was passed during the Trump administration, effectively legalized hemp; President Biden, meanwhile, signed the Medical Marijuana and Cannabidiol Research Expansion Act in 2022.
If anything, cannabis banking can be part of a bank’s efforts to develop more stable and diversified banking operations, according to Dunford. In the wake of the SVB crisis of 2023, cannabis banking has increasingly appeared as a resilient way to grow a portfolio without compromising on the stability of a financial institution’s operations.
Jeff Trammell, COO of Merchants and Marine Bank, told The Financial Revolutionist that federal cannabis banking regulations would improve the kinds of services that banks can offer to cannabis-related businesses, aiding both groups’ operational health.
“Most cannabis-related businesses (CRBs) are locked out of most traditional capital and debt financing markets and have to resort to high-fee and high interest debt/quasi-capital products to run their businesses,” he said. He hopes that CRBs can “fully participate on all financial rails, just not just a few selected ones” in the near future.
The writing is on the wall that more federal regulation will have to be on the way. With interstate—and maybe even international—cannabis operations on the horizon, financial institutions will require more than just state laws and guidance documents to continue operating compliantly. Or else, the legal cannabis industry will stagnate due to federal inaction.
