Banking reform remains stalled despite widespread state legalization in U.S.
Current Regulatory Landscape of Marijuana
Twenty-four states, the District of Columbia, and three U.S. territories have legalized recreational marijuana use for adults. This is in addition to the 40 states, D.C., and 4 U.S. territories that have legalized it medically. The marijuana industry in these states has generated staggering amounts of money.
There are a handful of federal laws, regulations, and executive guidance that impact marijuana-related businesses (MRBs). They are unable to obtain access to banking services. These include:
- The CSA
- The Bank Secrecy Act
- Anti-money laundering laws
- FinCen regulations
- DOJ enforcement guidance
The CSA
President Trump’s recent executive order directs his administration to reclassify marijuana. Until that happens, marijuana remains a Schedule I controlled substance. This means there is no currently accepted medical use for marijuana.
A Schedule I drug places marijuana in the same category as heroin, LSD, ecstasy, and methaqualone. The importation, manufacture, distribution, sale, possession, or improper use of marijuana or products containing marijuana is illegal under federal law.
It is federally illegal to sell, mail, transport across state lines, import, and export related drug paraphernalia. Individuals and entities engaging in these activities or that violate the CSA are subject to imprisonment and/or criminal fines.
The Bank Secrecy Act
The Bank Secrecy Act requires financial institutions to implement policies, ensuring their clients are not engaging in illegal behavior. It requires banks to file suspicious activity reports with the Treasury Department’s Financial Crimes Enforcement Network for transactions suspected to be derived from illegal activities. The act also requires banks to institute anti-money laundering policies. Failure for banks to follow these requirements could lead to civil and criminal penalties, as well as asset forfeitures.
Anti-Money Laundering Laws
Federal anti-money laundering laws criminalize the handling of money from illegal activity, such as the sale of marijuana that violates the CSA.
One example of an activity that could cause liability for a financial institution related to the marijuana industry is: “A bank employee could violate [18 U.S.C.] § 1956 for knowingly withdrawing funds generated from marijuana sales from a checking account to pay the salaries of recreational marijuana dispensary employees on behalf of the dispensary.” Another example – “a bank employee could face a 10-year prison term and civil and criminal money penalties under [18 U.S.C.] § 1957 for knowingly receiving deposits or allowing withdrawals of $10,000 or more in cash derived from the distribution or sale of recreational marijuana.”
In 2014, FinCEN issued guidance concerning when financial institutions should report activity that might trigger enforcement priorities. Specifically, there are three types of suspicious activity reports (SARs) that a financial institution might submit:
- A marijuana limited SAR should be filed when a financial institution determines, after exercising due diligence, that a marijuana business is not engaged in any activities that violate state law or implicate enforcement priorities outlined in the guidance.
- A marijuana priority SAR must be filed when a financial institution believes a marijuana business is engaged in activities that implicate enforcement priorities.
- A marijuana termination SAR should be filed when a financial institution finds that it must sever its relationship with a marijuana business to maintain an effective [anti-money laundering] program.
FinCEN has also provided guidance on “red flags” that may require a financial institution to submit a marijuana priority SAR, such as if a business fails to accurately demonstrate and document compliance with state marijuana laws. Banks and financial institutions are required to follow this guidance.
DOJ Enforcement Guidance and Priorities
Enforcement of the above-mentioned laws and regulations depends largely on the prosecutorial discretion of the Department of Justice (DOJ), the U.S. Attorney General, and the current administration. For the U.S. Attorney General, this prosecutorial discretion has been mixed in recent years.
In 2013, the Obama administration issued the Cole Memorandum, deprioritizing criminal prosecutions of these statutes related to marijuana activities.
Under the first Trump administration, then-Attorney General Jeff Sessions rescinded the Cole Memorandum, directing “U.S. Attorneys to enforce the laws enacted by Congress and to follow well-established principles when pursuing prosecutions related to marijuana activities.”
Recent Developments
In recent years, various bills in Congress were introduced to address the issues with MRBs’ access to banking services. These bills include:
- The SAFE/SAFER Banking Act
- The MORE Act
Trump’s recent executive action may change federal approaches to marijuana.
The SAFE/SAFER Banking Act
The Secure and Fair Enforcement (SAFE) Banking Act was introduced to protect financial institutions from liability for working with state-regulated MRBs. The U.S. House passed the SAFE Banking Act seven times from 2019 to 2022.
An expanded version of the bill, the Secure And Fair Enforcement Regulation (SAFER) Banking Act, was introduced in 2023. Congress has passed neither the SAFE nor the SAFER Banking Act as of the writing of this article.
The SAFER Act would provide financial institutions a “safe harbor” from criminal, civil, and administrative penalties related to services provided to a “state-sanctioned marijuana business or service provider.” Marijuana would remain federally illegal under this act, but it would provide financial institutions with statutory protections against liability for serving the marijuana industry.
Specifically, the SAFER Act would protect certain payment-related activities:
a) “whether performed directly or indirectly, the authorizing, processing, clearing, settling, billing, transferring for deposit, transmitting, delivering, instructing to be delivered, reconciling, collecting, or otherwise effectuating or facilitating the payment of funds that are made or transferred by any means, including by the use of credit cards, debit cards, other payment cards, or other access devices, accounts, original or substitute checks, or electronic funds transfers.”
b) “acting as a money transmitting business that directly or indirectly makes use of a depository institution in connection with effectuating or facilitating a payment for a State-sanctioned marijuana business or service provider.”
The SAFER Banking Act would not abrogate a financial institution’s requirements to perform due diligence and monitor for suspicious activities. The act would also not force financial institutions to serve the marijuana industry.
The MORE Act
U.S. Rep. Jerry Nadler, D-N.Y., first introduced the Marijuana Opportunity Reinvestment and Expungement (MORE) Act in 2019 in the House. The MORE Act would remove “marijuana from the list of scheduled substances under the Controlled Substances Act and eliminate criminal penalties for an individual who manufactures, distributes, or possesses marijuana.”
Put simply, the MORE Act would decriminalize marijuana under federal law. This change would be retroactive. States would still be permitted to criminalize marijuana under state law, but the act would eliminate any conflicts between federal and state law and permit banking for MRBs, as marijuana would no longer be federally illegal. The act, which the House passed in 2020 and 2022, would also initiate expungements and support those disproportionately impacted by prohibition.
Shifting Stance
Trump has signaled his administration’s shifting stance on marijuana. In 2025, Trump issued an executive order directing the U.S. Attorney General to reclassify marijuana from Schedule I to Schedule III. This would place marijuana alongside controlled substances with a moderate to low potential for physical and psychological dependence, such as anabolic steroids and Tylenol with codeine.
While the SAFE/SAFER Banking acts and the MORE Act would resolve some of the current tensions in state-legal marijuana markets, and therefore, would likely resolve the banking crisis for MRBs, neither of these bills will likely pass Congress in the near-term.
For example, the SAFE Banking Act has been introduced in some form since the 115th Congress. Indeed, the House has passed the bill seven times. Despite this, the bill has not passed the Senate. In 2023, the Senate Banking Committee favorably reported a similar bill, but so far, it has not passed the entire Senate. A legislative resolution to this issue may not be likely for some time, and it is too early to tell whether Trump’s new executive order will shake any of this legislation loose.
Cryptocurrency
Some MRBs have adopted cryptocurrency as an alternative method of payment to bypass the banking and financial institutions entirely. Cryptos provide MRBs with some obvious benefits: They are easily obtainable, they permit seamless and instant transactions, and they are secure. Cryptocurrency also permits MRBs to bank themselves by storing “value on the blockchain, receive funds, and transact with third parties without involving a bank or other financial intermediary.”
There are benefits of using cryptocurrency, but also drawbacks. There are challenges with converting to fiat currency, serious tax considerations, and potential wild fluctuations in cryptocurrency value. The crypto could be a potential stopgap while the marijuana industry waits for Congress to act. Whether it is a permanent solution is too early to tell. For now, marijuana banking remains largely the same as in years past.
Business-to-business transactions may be able to be processed utilizing traditional banking services (e.g., check deposits, ACH transfers, etc.) under heightened regulatory scrutiny. But consumer marijuana transactions largely occur in cash, with some dispensaries trying cryptocurrency to avoid regulatory hurdles with financial institutions. The industry, as a whole, looks forward to a legislative solution that will ease the burden on traditional financial institutions to participate in the state-legal marijuana space.