While South Dakota is still stalled when it comes to making legal cannabis a reality within state borders, the state is already working on legislation that allows banks to decide whether or not to do business with the legal cannabis and hemp industry.
While this could allow for an avenue to legal cannabis banking, if all or most banks choose not to work with cannabis, the future industry could be in real trouble. HB1203 just passed the House 64-4, and the next step is for it to clear the senate. Republican House Representative Hugh Bartels sponsored the bill and also spoke out in support of it.
According to the legal language of the bill, “A bank may, directly or through subsidiaries, carry on the business of banking, pursuant to § 51A-4-1, with any person licensed in this state to engage in the business of industrial hemp or marijuana, or with any person engaging in business dealings with such licensee. The commission shall promulgate rules, pursuant to chapter 1-26, to facilitate a bank carrying on the business of banking with a person described in this section.”
Many states struggle with illicit market activity and theft because of the reluctance of banks to work with cannabis industry businesses. As a result, the industry largely still runs on cash, something that is unhealthy because of the germs cash carries and the increased risk of theft.
Pros and Cons
Now, if this bill passes, South Dakota could have the chance to get a leg up on the many places that struggle with legal banking. However, it could also have the opposite effect. As long as businesses are licensed and legal, banks can work with them, but they can also opt not to on the basis of not wanting to be involved with the cannabis industry.
Speaking about the bill, Bartels pointed out what he claimed were “the extraordinary compliance issues” banks would have to deal with if they did choose to work with cannabis businesses. “This is just the first step,” he added.
While he doesn’t shy away from how many regulations bankers working with the industry will have to deal with, he also stated that “banking the cannabis industry” is what will allow cannabis to succeed in South Dakota.
It also remains to be seen exactly when South Dakota will pull the trigger on finalized legalization. Although the state made history by passing both medical and recreational cannabis last November, Governor Kristi Noem is still delaying the implementation of the industry, claiming that they need more time to make sure they get things right.
“We are working diligently to get IM 26 implemented safely and correctly,” Noem claimed “The feasibility of getting this program up and running well will take additional time. I am thankful to our legislative leaders for helping make sure that we do this right.”
It is still unclear if this delay, and this new bank proposal, will be good for the industry, or if those concerned about legal cannabis are simply stalling.