A New Jersey Assembly committee has approved a bill to provide state-level protections for banks and insurers that work with licensed marijuana businesses.
The Assembly Financial Institutions and Insurance Committee passed the bill from Assemblymember Verlina Reynolds-Jackson (D) with nearly unanimous support on Monday.
The bill would not immunize banks that service state-legal cannabis businesses from being penalized under federal law, but the committee action comes as congressional leaders are planning to file legislation that’s expected to contain those broader safeguards.
While the reform enjoyed strong support at Monday’s hearing, a couple members raised concerns about enacting something that might give people a “false sense of security” in light of ongoing federal prohibition, as the panel’s vice chair said.
Under the measure, it would be unlawful for a state agency to “prohibit, penalize, or otherwise discourage a financial institution or insurer from providing financial or insurance services to a legitimate cannabis-related business or the business associates of a legitimate cannabis-related business,” the text says.
Agencies also could not “recommend, incentivize, or encourage a financial institution or insurer not to offer financial or insurance services to an account holder, or downgrade or cancel services provided to the account holder, solely because the account holder is a legitimate cannabis-related business or a business associate of a legitimate cannabis-related business.”
It continues: “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.”
Members adopted an amendment before advancing the legislation, but the text of the changes are not yet publicly available.
The first adult-use marijuana retailers opened in New Jersey in April, and the state has seen significant demand, with sales reaching about $80 million in the first ten weeks alone.
New Jersey is bordered by two states—Pennsylvania and New York—where lawmakers have also taken steps to advance cannabis industry banking reform.
Pennsylvania’s legislature passed a marijuana banking bill earlier this year, and the governor signed it into law in July.
In New York, a senator filed legislation in April that’s meant to give banks in the state some peace of mind about working with legal cannabis businesses by allowing regulators to disclose certain information about marijuana licensees to financial institutions.
Back in New Jersey, the Assembly approved a bill in October that would allow licensed marijuana businesses to deduct certain expenses on their state tax returns, a partial remedy as the industry continues to be blocked from making federal deductions under Internal Revenue Service (IRS) code known as 280E.
But state-level reform can only provide so much in the way of protections for financial institutions under federal prohibition.
“Some banks in New Jersey partake in the business, others do not because they fear violating federal law,” a representative of the Pennsylvania Bankers Association said at Monday’s hearing. “This inherent tension between state and federal law, and the risk that’s baked into it, is what makes this determination of who is going to participate in this business.”
Recognizing that issue, congressional lawmakers are expected to imminently introduce legislation that includes language from the Secure and Fair Enforcement (SAFE) Banking Act, with plans to pass it during the lame duck session.
The House has passed that bill in some form seven times now, but it’s consistently stalled in the Senate.
Rep. Ed Perlmutter (D-CO), the House sponsor of the legislation, said last week that he sees signs that the Senate will finally act on the banking reform during the lame duck session—but he cautioned that he’s “been disappointed before.”
Senate Majority Leader Chuck Schumer (D-NY) had said in October that Congress was getting “very close” to introducing and passing the marijuana banking and expungements bill, citing progress he’s made in discussions with a “bunch of Republican senators.”
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The Department of Justice sent a memo to the congressional lawmakers about the SAFE Banking Act earlier this year, saying the legislation as drafted could “significantly complicate law enforcement investigations and prosecutions” of crimes involving other drugs or money laundering.
However, the agency did suggest that the bill is fixable from its perspective and offered guidance on how to resolve various issues—and Senate sources told Marijuana Moment that since receiving the memo earlier this year, lawmakers have effectively addressed DOJ’s concerns as a product of bipartisan negotiations over the forthcoming cannabis reform package.
Another federal agency recently released new and expanded data on the state of banking in the cannabis industry under the prohibitionist status quo.
At a top level, the takeaway is that the number of banks and credit unions that reported actively working with marijuana companies in the third quarter of the 2022 Fiscal Year remained relatively stable, with 784 financial institutions across the U.S. filing requisite “Suspicious Activity Reports,” or SARs, for marijuana-related business (MRB) clients.
About three in four American voters—including bipartisan majorities—support ending federal marijuana prohibition, expunging prior convictions and allowing banks to work with state-legal cannabis businesses, according to a recent poll.
Back in New Jersey, cannabis regulators approved rules for “public cannabis consumption areas” last week, bringing the state one step closer to providing the social use option to adults and patients.
A bill filed by Senate President Nicholas Scutari (D) over the summer would also authorize the governor to enter into agreements for interstate marijuana commerce with other states that have legalized cannabis. However, the agreements could only be forged if federal law changes, or if the Justice Department issues guidance permitting such activity.
The Senate president separately filed legislation to legalize psilocybin in New Jersey, and it includes provisions that would allow people to cultivate the psychedelic at home.
Meanwhile, Gov. Phil Murphy (D) said recently that the state should “revisit” its current criminalization of homegrown marijuana for personal use—but he thinks that conversation should happen at a later point after the commercial market has matured.
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Photo courtesy of Philip Steffan.
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