Provision of Banking and Insurance Services to Cannabis Industry Soon to be “Safe” in Pennsylvania

With the federal Secure and Fair Enforcement Banking Act – more commonly known as the “SAFE Banking Act” – still stalled in Congress, Pennsylvania’s legislature just took matters into its own hands, passing legislation that authorizes “financial institutions” and “insurers” to service the state’s medical-marijuana industry without fear of reprisal from the Commonwealth.

The legislation is now on the desk of Pennsylvania Governor Tom Wolf, waiting for him to sign it into law.

In relevant part, the legislation 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 legislation 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.”

Passage of this legislation would insulate financial institutions and insurers from state prosecution just for doing business with the Commonwealth’s cannabis industry. In relevant – and important – part, the legislation states 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 legislation 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].”

To be clear, as the text of the law plainly states, the new law does not apply to any “recreational”-cannabis-related conduct. Recreational, or “adult-use” cannabis, is still not legal in Pennsylvania.

Any financial institution, insurer, affiliated business, or cannabis-related business should consult with its own counsel to make sure it fully understands the legislation, its scope, and its other requirements.

According to Law360, the legislation recently passed the Pennsylvania House of Representatives by a vote of 173-27 after passing 46-4 in the Pennsylvania Senate.

While certainly a step in the right direction – in theory, increasing the Pennsylvania cannabis industry’s access to banks and insurers – the ultimate effect of this legislation, if it does become law, remains to be seen. While enactment of the legislation would offer some refuge to banks and insurers that service the cannabis industry in Pennsylvania, federal law provides no similar safe harbor. As such, whether financial institutions and/or insurers will really change their behavior – unless and until the SAFE Banking Act, which offers similar protections at the federal level, becomes law – is uncertain.

Of course, if and when the SAFE Banking Act does become law, more banks and insurers likely will be willing to do business with the cannabis industry. Until then, Pennsylvania’s new law hopefully will at least offer them some peace of mind.

If you have any questions about this legislation 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.