Skip to main content

The STATES Act—A Solution to the Cannabis Banking Problem on the Horizon?



By Danielle Hunt, Kalin Bornemann, Olivia Grabacki, and Jessica Roberts

As we previously discussed, financial institutions that offer financial services to the cannabis industry have been operating in a state of uncertainty in the wake of the rescission of the so-called "Cole Memo" earlier this year. Without the comfort of the Cole Memo, those financial institutions nevertheless continued to operate under a set of guidelines previously published by the Financial Crimes Enforcement Network (FinCEN). As you can guess, most financial institutions have been wary to deal with individuals or businesses with ties to the recreational cannabis industry due to this lack of clear federal guidance. However, these times of uncertainty could soon be changing. With the fresh introduction of Senate Bill 3032, also known as the Strengthening the Tenth Amendment Through Entrusting States Act (the "STATES Act"), clarity and security could be on the horizon for financial institutions hoping to "take the plunge" and offer services to the cannabis industry.

On June 7, 2018, U.S. Senators Elizabeth Warren (D-Mass.) and Cory Gardner (R-Colo.) and U.S. Representatives David Joyce (R-Ohio) and Earl Blumenauer (D-Ore.) introduced the STATES Act with bipartisan support. The STATES Act seeks to protect states from federal interference with state marijuana laws and regulations. Recognizing that "46 states have laws permitting or decriminalizing marijuana or marijuana-based products," the STATES Act would empower states to make and enforce their own laws related to the production and sale of marijuana. Passage and implementation of the STATES Act would mean three things:

  • First: The STATES Act would exempt "any person acting in compliance with state laws and regulations governing the manufacture, production, possession, distribution, dispension, administration, or delivery" of cannabis from the definition of "trafficking" under the federal Controlled Substances Act (the "CSA") - this exemption would also extend to Indian country located in states that have legalized cannabis. This means if a person were in full compliance with applicable state laws and regulations relating to cannabis, the STATES Act would protect that person from the threat of federal prosecution.
  • Second: Because compliant transactions involving cannabis would no longer be considered "trafficking" under the CSA, cannabis-related activity would no longer create illegal proceeds in the jurisdictions that decriminalize cannabis. In other words, if the STATES Act is passed into law, financial institutions could likely transact with individuals and businesses in the cannabis industry without the constant threat of money laundering prosecution, civil forfeiture of "dirty" collateral, and other criminal violations that could lead to a charter revocation.
  • Third: Industrial hemp would no longer be scheduled as a controlled substance under the CSA, and thus no longer criminalized at a federal level.

Financial institutions should be keeping a close eye on the status of the STATES Act as it works its way through the Legislature. The STATES Act's deference to state law is an interesting strategy on this issue, as our current U.S. President previously noted that marijuana legalization should be a "state issue, state-by-state." In fact, today President Trump said he "probably will end up supporting" the Bill. Although the future is unclear, the STATES Act demonstrates a bipartisan effort and desire to find answers in this uncertain regulatory environment. Who knows, maybe the STATES Act will be the solution many have been waiting for to open the door to traditional banking services for individuals and businesses in the recreational cannabis industry. Only time will tell - Stay tuned for updates.



  Edit this post