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The MORE Act Passes in the House: Challenges Still Lie Ahead for Marijuana Banking


Recently, the House of Representatives passed the MORE Act of 2020, a bill that would decriminalize marijuana. The vote marks the first time that Congress has voted on the issue.  Although it is unlikely that it will pass in the Senate, the move by lawmakers is symbolic of a shift in public opinion across the country. Now more than 68 percent of Americans are in support of marijuana legalization, according to a recent Gallup poll.

CRB Monitor MORE Act Blog

What is the MORE Act?

If the Marijuana Opportunity Reinvestment and Expungement Act, also known as the MORE Act, becomes law, marijuana will be removed from the list of scheduled substances under the Controlled Substances Act and allow for the elimination of criminal penalties for an individual who manufactures, distributes, or possesses marijuana. Supporters of the MORE Act are hopeful that a democratic majority in the Senate (as a result of Georgia’s runoff elections) will help move the bill forward. 

The bill also establishes other notable regulatory changes, including the following:

  • requires the Bureau of Labor Statistics to regularly publish demographic data on cannabis business owners and employees,
  • establishes a trust fund to support various programs and services for individuals and businesses in communities impacted by the war on drugs and imposes a 5% tax on cannabis products and requires revenues to be deposited into the trust fund,
  • makes Small Business Administration loans and services available to entities that are cannabis-related legitimate businesses or service providers.

Continued Regulatory Concerns

In the unlikely event that the MORE Act passes under the current Congress, the specter of serving an outright “illegal” industry may be removed. Nevertheless, additional regulatory and compliance complexities are expected to continue for financial institutions, regardless of whether they are looking to offer marijuana-related business (MRB) banking. 

First and foremost, federal legalization will not preempt any existing state laws. Thus, in general, marijuana will still be entirely illegal in many states. MRBs will be considered as operating illegally in states that have not passed marijuana-related legislation, if not properly licensed and regulated by the state in which it is grown, sold, purchased and/or consumed per applicable state statutes and requirements. Consequently, while there is a present gap between state and federal regulations, the same problems will exist in reverse: that is, within and/or between those states in which marijuana is not currently legal. 

Furthermore, as more states legalize marijuana, there is a potential for dozens of distinct regulations for each state, creating additional compliance burdens for MRBs and financial institutions as a result. Moreover, it should not be expected that every state will eventually legalize marijuana. Although the MORE Act makes certain federal funds available only to “eligible” states that have taken steps to expunge cannabis convictions and eliminate penalties for cannabis parolees, this may not be enough to push all states to legalize it. Therefore, it would be crucial for both MRBs and financial institutions to ensure full compliance of state and federal regulations across all jurisdictions in which they operate, to understand these cross-jurisdictional differences and adjust policies and procedures appropriately.

High-Risk Activities

It is probable that MRB banking will be considered an activity that is high(er) risk, with more costs and more regulatory scrutiny associated with it for years to come, much like the money-service business (MSB) industry. With more taxes added at the federal level, there is an increased likelihood for MRBs to operate illegally and/or to commit tax evasion. High taxes in California are already a problem that purportedly help to drive the ongoing black market and the addition of federal taxes may only worsen the issue. Money laundering will remain a concern for regulators and customer identification and due diligence continues to be a top priority for financial institutions to combat financial crime and terrorist financing. Thorough screening is extremely critical to adequately identify a customer and assess the risk profile of associated business activities.

Is your compliance program backed by comprehensive data on the cannabis industry? Do you have access to reliable information about MRBs to determine your firm’s level of risk exposure? Read more on our blog: You Don’t Know Pot: 5 Fundamentals to Understanding, Identifying, and Monitoring for CRBs. Or visit our website to request more information and get in touch with our team.

The information provided herein presents general information and should not be relied on as legal advice. If you have specific questions regarding a fact, please consult with competent legal counsel about the facts and laws that apply.

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