Pennsylvania Governor Signs Cannabis Banking and Insurance Protections into Law

It is official.

On July 11, 2022, Pennsylvania Governor Tom Wolf signed House Bill 331 into law, ostensibly making the Commonwealth safer for financial institutions and insurers that want to do business with the state’s medical marijuana industry.

In relevant part, the new law states that “[a] financial institution authorized to engage in business in this Commonwealth may provide financial services,” and that “an insurer may provide insurance services,” “to or for the benefit of a legitimate cannabis-related business and the business associates of a legitimate cannabis-related business subject to,” among other laws, generally (i) laws relating to providing “financial services” or “insurance services” to others, (ii) “any applicable consumer protection laws,” and (iii) any other laws “or additional requirements” specifically applicable to a financial institution or insurer servicing Pennsylvania’s cannabis industry.

A ”[l]egitimate cannabis-related business” is defined in the new law to mean “[a] person that participates in any business or organized activity that involves handling cannabis or a cannabis product, including cultivating, producing, manufacturing, selling, transporting, displaying, dispensing, distributing or purchasing cannabis or a cannabis product in compliance with federal law, the laws of this Commonwealth or a law established by another state.”

The new law is intended to protect financial institutions and insurers from state prosecution just for doing business with the Commonwealth’s cannabis industry. In relevant part, the law provides that, subject to certain limitations, “no financial institution or insurer, or the directors, officers, employees, agents, owners, shareholders or members of a financial institution or insurer, shall be subject to a criminal prosecution, sanction or claim for damages or any equitable remedy, solely because the institution or insurer is providing financial or insurance services to or for the benefit of a legitimate cannabis-related business or the business associates of a legitimate cannabis-related business.”

The law also states that “[t]he proceeds of any transaction involving the activities of a legitimate cannabis-related business may not be considered proceeds from an unlawful activity, solely because the transaction involves the proceeds from a legitimate cannabis-related business or a business associate of a legitimate cannabis-related business.”

It still further provides: “No legitimate cannabis-related business, or a business associate of a legitimate cannabis-related business, shall be denied any right or privilege by a state agency solely because of the business’s or business associate’s lawful participation in the Medical Marijuana Program established [in Pennsylvania].”

House Bill 331 was one of 40 bills that Governor Wolf signed into law on July 11.

Pennsylvania joins other states that have passed or are considering legislation intended to facilitate the cannabis industry’s access to insurers, banks, and other financial institutions. In 2020, California passed a law, which, according to Cannabis Business Times, “states that financial services and banking institutions are not acting criminally when engaging with a licensed cannabis business.” Some relief is also under consideration in New York. New York State Senator Jeremy Cooney reportedly is working “to find a banking solution that [makes] sense for New York cannabis businesses and financial institutions.”

Piecemeal, state legislation to protect banks, insurers, and others who want to do business with cannabis-related businesses is necessary at this time because the federal Secure and Fair Enforcement Banking Act – better known as the “SAFE Banking Act”  — remains stalled in Congress.

Passage of the SAFE Banking Act almost certainly would result in an increase in the number of banks and insurers willing to transact business with the state-legal cannabis industry. It is unclear, though, what effect, if any, related state efforts actually will have on the banking and insurance industries, given that federal law still does not afford protections similar to those just enacted into law in Pennsylvania,

Mike and the other members of the Cannabis Industry Group are prepared to help clients understand the new Pennsylvania law, comply with other laws in that and other jurisdictions, and structure their businesses in accordance with all applicable law. If you have any questions about this new law and how to structure your business in accordance with it once it becomes law, please contact Michael H. Sampson, the co-leader of Leech Tishman’s Cannabis Industry Group. Michael can be reached at 412.261.1600 or msampson@leechtishman.com. 

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Leech Tishman Fuscaldo & Lampl is a full-service law firm dedicated to assisting individuals, businesses, and institutions. Leech Tishman offers legal services in business restructuring & insolvency, construction, corporate matters, employment & labor, estates & trusts, intellectual property, litigation & alternative dispute resolution, and real estate. In addition, the firm offers a wide range of legal services to clients in the aviation & aerospace, cannabis, emerging cyber technologies, energy & natural resources, healthcare, and hospitality industries. Headquartered in Pittsburgh, PA, Leech Tishman also has offices in Chicago, Los Angeles, New York, Philadelphia, Sarasota, and Washington, D.C.