Things are about to change for cannabis and cannabis-related companies as the landmark laws to reform federal cannabis banking and insurance laws are just around the corner and the SAFE and CLAIM laws are now making their way through the Find Congress.
The Secure and Fair Enforcement (SAFE) Banking Act, already passed in-house, would allow financial institutions to do business with cannabis companies without the need to impose federal penalties. There are high expectations that the proposal will find its way through the Senate to President Biden’s desk.
The Law Clarifying Marijuana Insurance Law (CLAIM) was introduced in Congress in March and is in the first phase of the legislative process. If passed, insurance companies could serve cannabis companies without facing federal penalties.
Fear of sanctions kept banks and credit unions from working with the cannabis industry for years and forced cannabis companies to operate on a cash basis, making them criminal targets and creating complications for financial regulators. This is an important first step for cannabis companies to conduct more legitimate and safer operations.
The SAFE Banking Act: Providing a Legitimate Road for Banks and Lending
After 37 states and DC took action to legalize cannabis in any way, it is clear that the federal cannabis regulatory model has changed and the path is promising for the SAFE banking law.
The bill creates a safe haven for banks and credit unions, unless they are liable or subject to a federal forfeiture for the provision of financial services to a cannabis company.More competition means more capacity and lower premiums for everyone.
The bill would prohibit a Bundesbank supervisory authority from:
- Recommendation, inducement, or encouragement from a custodian, an account holder affiliated with a cannabis company not to offer financial services, or to prohibit or otherwise discourage a custodian from offering services to such a company
- Termination or limitation of deposit insurance or stock insurance of a depository institution only because the institution is providing services to a cannabis company
- Taking adverse or corrective prudential action on a loan that is made to an individual simply because the individual either owns such a business or owns real estate or equipment that has been leased to such a business.
The CLAIM Act: Helping Cannabis Businesses With The Right Insurance Coverage
Should the CLAIM Act pass, it will protect insurance companies that cover a state-sanctioned and regulated cannabis business. It would also prohibit the federal government from canceling an insurance policy issued to a cannabis company and protecting an insurer’s employees from liability for supporting a cannabis business.
The CLAIM Act will boost the insurance market and get more insurers to write cannabis policies. More competition means more capacity and lower premiums for everyone. The law would also have a significant impact on currently hard-to-obtain policies such as cyber coverage, Directors & Officers insurance (D&O), errors and omissions (E&O), and other management liability policies that have been extremely limited to cannabis companies.
Cannabis sales are still growing strongly worldwide
The cannabis market is not slowing down in the US or around the world. Recent projections put U.S. sales to $ 28 billion in 2022.
As in Canada, where cannabis was federally legalized in 2018, there will be a steep learning curve across the industry for financial services and insurance providers who do not yet understand the risks and liabilities of cannabis operations, even if the SAFE and CLAIM Acts are passed this year. And yet, this is a huge step in the right direction to sell cannabis safely and fairly across the country.