Two important bills were introduced in the U.S. Senate and House of Representatives that would provided needed protection to title and settlement services companies when handling transactions involving cannabis businesses. ALTA supports efforts to clarify compliance for businesses that provide services to the growing cannabis industry.
In the House, the bipartisan Secure and Fair Enforcement (SAFE) Banking Act of 2021 was reintroduced. The bill prevents federal regulators from taking enforcement actions against financial institutions and insurance companies that do business with the cannabis industry in states where it is legal. It also provides protection from prosecution for handling cannabis funds. The goal of the bill is to move those businesses away from cash and into the banking system. It has broad support from the financial services industry.
The bill was introduced by Rep. Ed Perlmutter (D-Colo.), sponsored by U.S. Reps. Nydia M. Velázquez (D-NY-07), Steve Stivers (R-OH-15) and Warren Davidson (R-OH-08) and cosponsored by more than 100 members. In 2019, the bipartisan proposal passed the House 321-103 but stalled in the Senate.
“The genie is out of the bottle and has been for many years,” Congressman Perlmutter said. “Thousands of employees and businesses across this country have been forced to deal in piles of cash for far too long, and it is the responsibility of Congress to step up and take action to align federal and state laws for the safety of our constituents and communities. The public safety need is urgent, and a public health and economic need has also emerged with the pandemic further exacerbating the cash-only problem for the industry. In many states, the industry was deemed essential yet forced to continue to operate in all cash, adding a significant public health risk for businesses and their workers. As we begin our economic recovery, allowing cannabis businesses to access the banking system would also mean an influx of cash into the economy and the opportunity to create good-paying jobs.
Meanwhile, U.S. Sen. Bob Menendez introduced the Clarifying Law Around Insurance of Marijuana (CLAIM) Act of 2021. The bill, cosponsored by Sens. Rand Paul (R-Ky.) and Jeff Merkley (D-Ore.), ensures legal marijuana and related businesses have access to comprehensive and affordable insurance coverage.
The CLAIM Act ensures businesses operating under state laws that have legalized recreational or medical marijuana have access to insurance products such as worker’s compensation, property, casualty and title insurance. Because they could be prosecuted or face penalties under federal law, these state-authorized cannabis businesses are often denied access to the insurance market leaving them vulnerable and risking the safety of employees, customers, and the community. Businesses can also be denied bank financing if they do not have the proper insurance.
“Current federal law prevents these small business owners from getting insurance coverage, and without it, they can’t protect their property, employees or customers,” Sen. Mendez said. “Our legislation simply levels the playing field for legal cannabis businesses, allowing them to fully operate just as any other legal small business would by permitting insurance companies to provide coverage to these enterprises without risk of federal prosecution or other unintended consequences.”
There are now 15 states, two territories and Washington, D.C., that have legalized marijuana for recreational use, while 34 states and two territories allow medical marijuana. While more states are legalizing the use of cannabis, the federal government still categorizes marijuana as a controlled substance. Because marijuana is illegal under federal law, the title industry faces several challenges and significant risk when handling transactions involving money associated with cannabis.