CBD may be left out of groundbreaking federal banking legislation. Bipartisan bills intended to facilitate normal banking services for companies producing and marketing “cannabis-related products” are advancing in the US House and the Senate. The Secure and Fair Enforcement Banking Act of 2019 (SAFE) passed the House Financial Services Committee in March (H.F. 1595), and its companion bill was introduced in the Senate in April (S. 1200). Following positive comments by Treasury Secretary Mnuchin, the attorneys general of 38 states and territories followed suit in May with a supportive letter to congressional leaders. While there is general agreement that Congress should clear the way for routine banking activity in the cannabis market, it is possible that Congress might define the scope of banking protection in a way that excludes CBD.
Current language in the SAFE Act would shield banks from adverse federal regulatory actions based solely on the reason that the bank “provided financial services to a cannabis-related legitimate business or service provider.” So far, so good. The intention is to provide a federal safe harbor for banks to provide services to state-legal cannabis businesses. But, the key question is “What is a cannabis business?” The potential trouble with the language of the SAFE Act is that “cannabis” is defined narrowly as having the same meaning “as the term ‘marihuana’ in section 102 of the Controlled Substances Act (21 U.S.C. 802).” There is no mention of CBD or hemp in the definition of protected transactions – could that mean CBD-based transactions are NOT protected?
Leaving aside some twisty legal issues raised by approving bank transactions arising from the sale of a product that is still explicitly illegal under the Controlled Substance Act, the plain meaning of the defined scope of protection extends only to “marihuana” – and thanks to the 2018 Farm Bill, hemp and CBD are once and for all declared to be NOT marijuana. Therefore, it could be said that hemp and CBD are NOT included within the safe harbor defined in the SAFE Act.
And maybe that’s just fine. CBD advocates will point out that no special safe harbor is necessary because the legality of CBD and hemp under the Farm Bill already provides cover for national banks – there is nothing to be “protected” from. While that position may be absolutely correct, not all banks are convinced. There are numerous recent reports from CBD businesses who still encounter substantial and ongoing difficulty in conducting “normal” bank transactions. Ironically, some more conservative banks may determine that it is safer to facilitate transactions in marijuana as specifically protected under the SAFE Act than to support CBD businesses which still operate in what they perceive as a grey area of the law.
The solution may lie with the Treasury Department rather than Congress. While Congress could include hemp and CBD within the scope of protected “cannabis-based businesses”, CBD advocates might object to occupying any space still connected to “marihuana” as a controlled substance, even if that space is defined as a safe harbor. Rather having Congress add CBD to the SAFE Act, the Treasury Department could provide sufficiently soothing guidance to the banking industry based on the existing Farm Bill. Once banks are fully satisfied that federal regulators no longer consider hemp and hemp-derived products to be controlled substances, then banks could safely relax internal restrictions on conducting normal operations with businesses in the CBD market.