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Banking & Financial Regulations of Cannabis

States Regulation on Cannabis Usage

The National Conference of State Legislatures (NCSL) recognizes that the majority of states and territories have legalized medical cannabis usage. Further, NCSL recognizes that a growing number of states have legalized adult-use recreational cannabis. Many of these states are creating substantial regulatory regimes with respect to the cannabis industry to ensure compliance with the law, prevent diversion into the illegal market and provide transparent financial oversight of licensed businesses.

Harm to Financial Institutions

These new regulatory schemes relating to cannabis have created a significant expansion of the cannabis industry authorized under state law. NCSL acknowledges that due to the expansion of legal cannabis, legitimate business enterprises need access to financial institutions that provide capital, security, efficiency, and record keeping. Despite many states passing their own regulations, cannabis remains illegal at the federal level as a Schedule I drug under the federal Controlled Substances Act. NCSL is concerned that under this law, the federal Bank Secrecy Act and concordant regulations impose substantial administrative and operational burdens, compliance risk and regulatory risk that serve as a barrier to banks and credit unions providing banking services to businesses and individuals involved in the cannabis industry. NCSL believes that this form of federal prohibition on cannabis jeopardizes the financial services industry as well as the cannabis industry. Providing banking services to cannabis related businesses entails additional risk to banks and credit unions because cannabis is a Schedule I drug under the Controlled Substances Act, substantially increasing risk of civil or criminal liability.

Business Protection

Current federal regulations force financial institutions to incur inordinate risk, should they decide to provide banking services to licensed cannabis businesses. The National Conference of State Legislatures recognizes that allowing access to banking services will improve the regulation of cannabis businesses. NCSL recognizes that the current federal guidance for providing financial services to cannabis businesses is insufficient, as it does not change applicable federal laws, imposes significant compliance burdens and is subject to change at any time. NCSL recognizes that without banking options, cannabis related businesses are forced to operate exclusively in cash, while a large and growing cash-only industry attracts criminal activity and creates substantial public safety risks. NCSL acknowledges that a cash-only industry reduces transparency in accounting and makes it difficult for states to implement an effective regulatory regime that ensures compliance. NCSL is concerned with the inability of cannabis related businesses to pay taxes in a form other than cash, which may only be remitted in person. NCSL acknowledges that this creates a substantial burden for state governments to develop new infrastructure to handle the influx of cash and for business owners who may have to travel long distances with large sums of cash. States have been forced to take expensive security measures to mitigate public safety risks to taxpayers utilizing the system, state employees and the public at large. NCSL is concerned that states do not have any control over the enforcement of federal laws and cannot enact legislation that provides banks and credit unions with protections necessary to secure their business interests in light of federal law.

Controlled Substances Act

National Conference of State Legislatures calls on Congress to amend the Controlled Substances Act to remove cannabis from scheduling, thus enabling financial institutions the ability to provide banking services to cannabis related businesses. NCSL additionally acknowledges each of its members will have differing and sometimes conflicting views of cannabis and how to regulate it, but in allowing each state to craft its own regulations, we may increase transparency, public safety, and economic development where there is support to do so.

Banking and Financial Services

State Sovereignty in Financial Services

The National Conference of State Legislatures (NCSL) is concerned that Congress, the federal financial services regulators, and the federal courts have sought to nationalize control of financial services in Washington, D.C. NCSL has consistently and strongly advocated for state sovereignty in financial services regulation. NCSL has opposed any federal preemption of state legislative or regulatory authority in financial services. A high threshold that federal action is necessary, such as a national financial crisis, should be met before any preemption of state financial services laws and regulations is warranted.

Preservation of Dual Banking System

NCSL is committed to the preservation of the dual banking system. The dual banking system enables state governments to apply laws and regulations to state-chartered banks, thrifts, and non-bank financial services, including financial technology entities that serve the needs of local economies and that respond to the values and concerns of local citizens. In recognition of the advantages of the dual banking system to the public and to the health of the financial services industry, NCSL opposes any efforts by the federal government to restrict state authority to charter, supervise, or regulate the powers of state-chartered banks, thrifts, and non-bank financial services, including financial technology entities. NCSL opposes any federal attempts to tax state banks for federal oversight services already performed by the appropriate state banking agencies and departments. NCSL recognizes that the states have a duty to use their powers responsibly and in a way that does not endanger the deposit insurance system and the nation’s financial stability.

NCSL urges Congress to continue close scrutiny of federal banking regulators to limit preemption of state consumer protections.

Federal Regulatory Consolidation

NCSL recognizes the need for the federal government to reduce the federal regulatory burden that can impede the economic vitality of our nation's financial services industries. In consolidating the federal banking regulators, Congress must ensure that any consolidation does not invalidate the regulatory independence of the dual banking system.

NCSL opposes any federal regulatory consolidation plan that would:

  • Preempt, limit, or interfere with the rights of states to regulate state-chartered banks, thrifts, and non-bank financial services, including financial technology entities;
  • Require federal reporting requirements and examinations that duplicate state efforts;
  • Place state-chartered banks, thrifts, and non-bank financial services, including financial technology entities at a competitive disadvantage with national banks or federal thrifts; and
  • Grant oversight authority for state-chartered banks, thrifts, and non-bank financial services, including financial technology entities to federal banking regulators.

Federal Preemption

NCSL strongly believes that a high burden of proof must be established before federal preemption of state banking authority is justified and that only Congress—and not federal regulatory agencies—can preempt the actions of elected state leaders. NCSL strongly opposes any effort by federal banking regulators to assert regulatory authority to weaken the standard of preemption or shield national banks and bank operating subsidiaries from state consumer protection laws and enforcement.

Dual Chartering of Credit Unions

NCSL believes that state credit union supervisors have the primary responsibility for assuring the safety and soundness of credit unions chartered by and operating under state law and regulation. NCSL supports the authority of state governments to determine how state-chartered financial entities must be insured and opposes any efforts by the federal government to preempt state authority to govern state deposit insurance requirements.

NCSL additionally acknowledges that federal deposit insurance agencies, like the National Credit Union Administration (NCUA), have a legitimate role to play if state authorized powers lead to unreasonable risks for NCUSIF. However, NCUA regulations and policies should be crafted in a way that minimizes the preemption of state authority. NCSL opposes any effort by the Administration and Congress to erode the dual chartering system for credit unions by preempting state credit union laws and regulations that do not adversely impact the financial well-being of state-chartered credit unions and thus the NCUSIF. Any preemption of state credit union laws or regulatory authority should only occur if an imminent risk to the credit unions’ share insurance fund is threatened.

Consumer Protection

There is overlapping state and federal legislative jurisdiction that ensures consumer access to basic financial services; to protect the privacy of consumers of financial services and the security of their personal financial information; to provide protection for consumers from abusive lending practices; to ensure disclosure of information about credit terms, interest rates, fees, and balances; to regulate branch closing; and to otherwise protect the public. In recognition that this is an area of overlapping federal and state jurisdiction, NCSL will ordinarily not oppose such federal consumer protection measures, provided that there is no preemption of complementary state consumer protection legislation.

Financial Services and Economic Development

NCSL recognizes that racial, ethnic, or gender discrimination by financial services entities may have an impact on the ability of residents in distressed communities to obtain financial assistance.  NCSL also recognizes the need for financial institutions to make safe, sound, and profitable investments, recognizing the responsibility that each state has for financial regulation, solvency and ensuring fair lending to their constituents NCSL recognizes that each state legislature has the responsibility to address the unique needs of its state. Congress must not mandate federal guidelines that impede the states' abilities to regulate financial services.

Financial Technology

As online financial services products continue to grow, clear rules must be established as to which jurisdiction’s consumers protections apply to a given transaction. NCSL believes that any such rules should be crafted through a partnership between state and federal regulators and should not place state-chartered financial institutions at a disadvantage in their ability to provide services over the internet. State banking laws provide thorough consumers protections and NCSL strongly opposes any efforts by Congress or federal regulators to preempt state banking authority in regulating financial technology companies that would limit the financial protections states provide to their citizens.

NCSL believes that state banking regulators should maintain primary responsibility of chartering and supervising financial technology companies that operate in their state. States have implemented the Nationwide Multistate Licensing System to make the licensing and registration process more uniform and efficient for companies across the country while still providing rigorous protections to consumers. States have also created standards to protect the data privacy of citizens and reduce discrimination in financial services while encouraging innovation. Regulatory sandboxes are often utilized by states to encourage new technologies and innovation without prohibitive government regulation so that states can determine the best regulatory framework for the new technology. These unique solutions should not be infringed upon so that states can continue to inspire innovation while protecting the public.

Securities Regulation

NCSL recognizes that the federal government has an interest in efficient and fair capital markets. NCSL also acknowledges that state’ securities agencies are indispensable partners with their federal counterparts engaging in the pursuit of fair and efficient capital markets by protecting local investors, workers, and communities by ensuring compliance with securities laws.

NCSL is concerned that the preemption of state securities laws and regulations will serve only to erode investor trust in the capital markets by further weakening a system designed to protect investors and putting the financial well-being of hard-working Americans at risk. NCSL opposes such federal preemption and the creation of self-regulatory organizations that usurp state authority. Instead, NCSL supports congressional efforts to expand the restoration of state securities regulators’ authority.

Mortgage Industry

Currently states regulate a significant portion of mortgage lending. Federal intervention in this area of supervision will displace the state regulatory system and could erode, or even eliminate, the current authority the states have to supervise and license mortgage professionals. The local nature of real estate and consumer protection necessitates direct state authority.

States, through the Conference of State Bank Supervisors (CSBS) and the American Association of Mortgage Regulators (AARMR), developed the Nationwide Multistate Licensing System (NMLS) to improve and coordinate mortgage supervision. This state system enhances consumer protection and streamlines the licensing process for regulators and the industry. NCSL supports the NMLS to encourage a more coordinated system of state and federal supervision.

Financial Information Security

NCSL believes that states should continue to play a vital role in protecting the privacy, confidentiality, and security of sensitive nonpublic personal financial information. States long have sought to balance the economic value of information sharing with reasonable safeguards against the unnecessary disclosure and inappropriate acquisition of sensitive nonpublic personal financial information, such as credit information, account numbers, account balances, and Social Security numbers. Understanding local and regional economic situations and the unique needs of consumers within these markets, states consistently have ensured the protection of sensitive nonpublic personal financial information.

NCSL recognizes that financial information security is an area of overlapping federal and state jurisdiction. Therefore, NCSL does not oppose federal baseline standards for the protection of financial information, provided that these standards generally do not preempt complementary state laws. NCSL believes that states should have the authority and flexibility to adopt standards for the acquisition, retention, disclosure, and sharing of financial information by and among financial institutions and nonaffiliated third parties that address local concerns or respond in a timely way to incidences of neglect or abuse that may be local or regional in nature. NCSL specifically believes that Congress should preserve state authority to exceed federal baseline standards for information sharing among nonaffiliated third parties.

Credit Reporting

NCSL acknowledges the benefit to the nation's economy of a uniform national credit reporting system and does not oppose the limited areas that were subject to federal preemption by the 1996 Amendments of the Fair Credit Reporting Act and made permanent by the Fair and Accurate Credit Transactions Act. In doing so, NCSL supports the continued exemption of the state laws that were in existence prior to the 1996 Amendments and thus are currently exempted from the preemption provisions.

Data Security Breach Disclosure

Consistent with NCSL’s general policy for safeguarding financial information, NCSL does not oppose baseline federal data security breach notification standards, provided that the requirements do not preempt state authority to adopt standards that provide affected consumers additional protection and notification. NCSL also supports allowing state financial regulators and attorneys general to enforce any new federal data security breach notification standards.

In the event that Congress decides to preempt state law, NCSL urges that the preemption be narrowly construed to preempt only state laws that are inconsistent with the federal standard while preserving state laws that apply to entities that may be excluded from the federal act. Additionally, should Congress decide to preempt state data security breach notification laws, NCSL would support a strong federal law that would require notification of the affected consumers when sensitive personally identifiable information has been, or is reasonably believed to have been, accessed or acquired. In this instance, exceptions should be made only when it is concluded that there is no significant risk that the breach has resulted in, or will result in, harm to the individual whose information has been breached.

The Internet and Electronic Commerce

The Internet defies a detailed one-size-fits-all approach to public policy and regulation. America's federal and state lawmakers, as well as policy makers from other countries should be guided by principles that foster the Internet's development while protecting the security and privacy of individual users.

Our nation's state legislatures are well-aware of the impact that access to the Internet and electronic commerce have on the economic vitality of our states and communities. State legislatures also recognize that the marketplace for electronic commerce is global, not just in the United States. State legislatures share the concern of many in Congress that ill-conceived over-regulation and taxation of the Internet and electronic commerce services could harm our nation's ability to compete globally. However, state legislatures also recognize that they have an obligation to act, when and if necessary, to protect the general welfare of their constituents. As the use of the Internet continues to expand, any future or existing regulations must be balanced against market forces in a competitive and technologically neutral manner, as government must not choose the winners or losers of the digital age.

Nothing in this policy statement is to be construed as limiting or affecting the right of any state to regulate alcohol according to its local norms and standards pursuant to the 21st Amendment.

NCSL opposes unnecessary or unwarranted federal legislation or regulation that would impede efforts by states to promote access to the Internet, enhance competition or increased consumer choice, or ensure the security of personal information of consumers conducting electronic commerce transactions.

The National Conference of State Legislatures (NCSL) supports the following principles in formulating laws and regulations that impact the Internet and electronic commerce:

Data Privacy and Security

With the proliferation of data online, including the internet of things and mobile devices, the regulation of the collection, sales, and transmission of consumer data is increasingly a priority for state and federal lawmakers. NCSL recognizes the importance of consumer data privacy and security protections, as well as the role of the states as leaders in establishing those protections for their constituents.

In response to many high-profile security breaches and violations of consumer privacy, data privacy and security have become the subject of increasing regulation, most notably the General Data Protection Regulation (GDPR) in Europe. States and the federal government are working to protect against data breaches, mishandling of data, and non-transparent sale of consumer data in a way that balances myriad competing interests and allows for innovation while safeguarding the rights of consumers. Congress has yet to enact any significant or comprehensive legislation that addresses consumer data privacy and security protection. Meanwhile, state activity in the areas of data privacy and security has significantly increased in the past few years and states will not hesitate to act in the absence of federal legislation.

NCSL opposes blanket state preemption in federal data privacy and security legislation.   However, because of the interstate nature of the internet and data transmission, NCSL recognizes the need for uniformity in the regulatory environment. Although data privacy and security legislation has traditionally followed a sector-by-sector approach, NCSL further urges Congress to consider comprehensive legislation in setting any national standard.

NCSL strongly urges Congress to engage in regular and meaningful consultation of state lawmakers when considering federal privacy and security legislation. State lawmakers should be included in hearings, review of draft language, principle setting, and other Congressional activity intended to impact state regulatory regimes.

If Congress develops a national standard, NCSL strongly encourages consultation with states and recognition of state expertise in addressing the varied interests of each state’s unique constituency. In any federal legislation, NCSL urges Congress to prioritize transparency and informed privacy decisions, and to carefully consider the best method for consumer notice, disclosure, and consent. NCSL further encourages Congress to consider issues of third-party access and sales, disposal of data, consumer rights to control data, and the burden of protecting consumer data. States have also engaged in significant deliberation over the applicability of consumer protections to various data types, including how to define personal data and how categories of data collectors or sellers should be regulated. NCSL supports recognition by Congress of states’ expertise on these issues and opposes any legislation that preempts state law without meaningful consideration of state priorities or established consumer protections.

NCSL also recognizes the rapidly evolving nature of data collection and urges Congress to consider biometric data, location data, and technologies like facial recognition and artificial intelligence when considering federal legislation.

States should retain the right to establish their own legal rights of action, enforcement regimes, and oversight authority. NCSL urges Congress to protect the right of the states to enforce data privacy provisions in any federal legislation.


NCSL recognizes the increase in telemarketing activity and robocalls across the nation and the work of the Consumer Financial Protection Bureau and Federal Communications Commission on expanding consumer rights in this area. NCSL encourages Congress to pass legislation to protect consumers from harassment and predatory telemarketing activity, including requiring telephone service providers to, at no cost to the customer:

  1. Make robocall mitigation technology available to any customer;
  2. Implement call authentication technology to identify likely spoofed calls; and
  3. Offer call blocking technology.

Free Speech

The Internet allows people to communicate and share ideas with others with an ease never before possible. Federal government policy should rigorously protect freedom of speech and expression on the Internet, but not restrict states or local governments from oversight protecting freedom of speech. New technologies should adequately enable individuals, families and schools to protect themselves and students from communications and materials they deem offensive or inappropriate. State law enforcement, with federal assistance and resources, must be able to enforce criminal statutes against predators that use the Internet to harm or abuse children.


NCSL requests that Congress to maintain the current self-governance approach that allows the competitive marketplace to drive broadband and broadband-related applications development and deployment. Congress should avoid adopting new mandates and provide the Federal Communications Commission (FCC) with defined and limited authority to oversee, but not proactively intervene in, the broadband Internet marketplace consistent with principles that focus on assessing whether the market continues to ensure that consumers can:

  1. Receive meaningful information regarding their broadband service plans;
  2. Have access to their choice of legal Internet content, recognizing the limits on bandwidth and quality of service of their service plan;
  3. Run applications of their choice, subject to the needs of law enforcement and the limits on bandwidth limits and quality of service of their service plans, as long as they do not harm the provider’s network or interfere with other consumers’ use of the broadband service; and
  4. Be permitted to attach any devices they choose to their broadband connection at the consumer’s premise, so long as they operate within the limits on bandwidth and quality of service of their service plans and do not harm the provider’s network, interfere with other consumers’ use of the broadband service, or enable theft of services.


Public policies must be designed to foster continuing expansion of useful and affordable bandwidth, encourage development of innovative technologies and promote broad universal access. Federal and state governments must work together to ensure that all Americans, regardless of where they live, have competitive access to high-speed broadband technologies. Government must work to guarantee open and competitive markets for broadband services.

Information Technology

Information technology (IT) is a global industry. A strong American IT industry enhances and strengthens the economic well-being of our states and nation. States and the federal government must work together to ensure a climate that allows America’s IT companies to continue to perform research and technology development, to generate innovative new products and services and to solve customer problems. States must have the unfettered ability to continue to seek ways to use IT to better the lives of their residents. Therefore, NCSL opposes any attempt by the federal government to restrict or penalize states’ efforts to utilize information technology services and products that allow states to provide more efficient government services to residents at lower costs to taxpayers.

Internet Gambling

Congress must respect the sovereignty of states to allow or to prohibit Internet gambling by their residents.

The Wire Act of 1961 prohibits using an interstate wire communication to transmit bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest. The law also made it illegal to use interstate wire communications transmissions to provide remuneration for winning bets or wagers or for information assisting in the placing of bets or wagers.

In 2018, the Supreme Court’s ruling in Murphy vs. National Collegiate Athletic Assn. allowed states to legalize and regulate sports betting for the first time, and many states have passed or are considering legislation that allows online gaming. Additionally, states currently engage in online gaming markets, interstate online poker pools, online lottery sales, and interstate lottery pools, among other online gaming activities. States and bettors also use the internet for marketing and payment processing. Some states currently utilize technology that restricts sportsbooks and users to operate within state lines.

The Department of Justice has issued several memos on the application of the Wire Act that may impact the ability of states to operate and regulate a variety of online betting and gaming activities. In 2019, the Office of Legal Counsel in the Department of Justice issued a revision of their 2011 opinion. The revision stated that the restrictions in the Wire Act apply to any form of gambling that crosses state lines, and may impact many currently legal state gambling activities, including the passing of data through intermediaries. The revision creates uncertainty in the regulatory environment and may cause disruption in state markets as litigation follows.

NCSL recognizes the importance of state sovereignty in the operation and regulation of online gaming and the importance of a predictable and stable regulatory environment. NCSL encourages Congress and the Department of Justice to engage in regular and meaningful consultation of state lawmakers and regulators when considering bills, opinions, or other actions that may disrupt current state markets or affect the ability of states to regulate online gaming. NCSL recognizes that states are best suited to regulate online gambling and encourages the Department of Justice to revise its current interpretation of the Wire Act to recognize state sovereignty in regulating these activities and provide market stability.

NCSL also urges Congress to clarify the Wire Act to protect the ability of states to operate and regulate online gambling activities as they see fit, including currently legal activities threatened by the revision of the OLC opinion. NCSL further recognizes that the Wire Act contains language that is out of date and does not reflect the reality that states, markets, consumers, and regulators operate in the age of the internet and digital commerce. NCSL supports a revision of the Wire Act that updates the Act to more accurately represents current technology and communications capabilities.

Electronic Commerce and Taxation

Government policies should create a workable infrastructure in which electronic commerce can flourish. Policy makers must resist any temptation to apply tax policy to the Internet in a discriminatory or multiple manner that hinders growth. Government tax systems should treat transactions, including telecommunications and electronic commerce, in a competitively neutral and non-discriminatory manner. The federal government and America’s industries should work with state legislatures in ensuring equal tax treatment of all forms of commerce and should encourage state efforts to achieve simplification and uniformity through the streamlining of state and local sales and telecommunications tax systems.

NCSL supports the reform of the discriminatory taxation of communications services and believes that if state and local governments were to take such action, the need for the federal moratorium on Internet access would cease to exist.

Video Franchise Reform

Innovation and convergence of existing technologies are radically expanding communications and information services, blurring distinctions between telephone, Internet services, cable, wireless and satellite. These rapid changes often outpace abilities of federal, state and local regulatory regimes to adapt. It is important that video regulatory policy assure that like services are treated alike, investment is encouraged, and services are in a non-discriminatory manner.

State Administration Will Preserve State Authority

Local jurisdictions are the creation of either state constitutions or law. The powers that these political subdivisions of the state exercise were granted to them over time by state legislatures. Those local jurisdictions that have franchise authority have it as a result of state legislation or the state constitution. Therefore, any attempt by Congress to preempt current local franchise authority is a preemption of state sovereignty.

While NCSL rarely advocates the consideration of legislation in state legislatures, NCSL has at times, when states are facing a crisis or a serious threat of federal preemption, urged state legislatures to take action. NCSL endorses efforts that remove barriers to entry for or inequity of regulation among video competitors and foster additional consumer choices in the video marketplace ultimately ensuring competitive neutrality.

Government should encourage competition and consumer choices for broadband and video services and promote the deployment of broadband services and technologies, as well as including options for public-private partnerships where applicable.

Fees and Taxation of Video Providers

Franchise fees today are levied, imposed or collected as a percentage of gross revenues, used for general revenue purposes and not based on the actual direct and identifiable costs of any benefit to the entity that pays the fee. To the extent such fees are intended as payment for use of public rights-of-way, that fee should be limited to the actual, direct and identifiable cost of such use, and that portion of the fee should be applied only to those who use the rights-of-way. Franchise fees should be collected and administered by one central agency per state.


Insurance Regulatory Modernization

The National Conference of State Legislatures (NCSL) is committed to state regulation of the business of insurance. NCSL acknowledges the responsibility of states to adjust state systems to meet the needs of the modern economy. NCSL opposes any proposal to establish either a federal or a dual system of regulation of insurance, to cede any state authority to regulate financial institutions involved in the business of insurance or to obtain Congressional ratification of trade agreements that preempt state regulation of insurance.

States and insurance commissioners continue to develop a shared vision of insurance regulatory reform to meet the needs of the modern marketplace while preserving the advantages of the state system. NCSL supports the efforts of states to streamline and simplify insurance regulation. NCSL endorses state participation in the Interstate Insurance Product Regulation Commission, which creates a national state-based system to make regulatory decisions quickly on life insurance products according to uniform national standards. 

NCSL believes that state efforts to enact significant reforms in critical areas represent tremendous progress, and NCSL will continue to support further efforts as states move forward to achieve widespread reform in all areas in the years ahead.

State-Federal Partnership

Individually and at the national level, states work to modernize insurance regulation. However, state legislatures recognize a legitimate federal role in overseeing and promoting well-functioning insurance markets.

Title V of the Dodd-Frank Wall Street Reform and Consumer Protection Act established The Federal Insurance Office (FIO) within the U.S. Department of Treasury. While NCSL and other state groups were successful in limiting the scope of the FIO’s authority, concern remains that the FIO will serve as a vehicle to promote a greater federal role in the historically state-regulated industry of insurance.

Therefore, NCSL opposes any administrative action by the FIO or federal legislation that: relies on wholesale preemption of state authority, would compel state compliance with federal standards or those of any non-governmental third party, or conditions, restricts or redirects state insurance revenues, including insurance premium taxes, fees and fines, either directly or as a condition of a state’s refusal to submit to federal standards or federal efforts to commandeer a state executive branch official to participate in a federal regulatory program.

Moreover, some in Congress and industry support federal legislation to establish a single federal regulator of insurance or allow for dual federal and state insurance regulation. NCSL opposes any provision of federal legislation that preempts state authority through the creation of a federal insurance official, commission or entity with the authority to regulate insurance, to implement federal standards, to enforce state compliance with federal standards, or to initiate or participate in judicial proceedings to resolve differences between federal standards and state law.

State legislators perform a critical role in the development of insurance public policy. However, despite this important function, state legislators are oftentimes overlooked for service on federal advisory boards and committees related to the regulation of the business of insurance. Recognizing this recurring oversight, NCSL requests an enhanced effort from the federal government to incorporate state legislators onto associated insurance advisory panels.

Insurance Company Solvency

The safety and soundness of insurance companies operating in the United States are the prime objective of state insurance regulation. State legislatures have endeavored to strengthen state insurance departments and to create standards for financial regulation that have improved the solvency of insurance companies.

NCSL opposes any proposal to establish federal standards for state solvency regulation that cedes any authority to federal agencies to regulate financial institutions involved in the business of insurance, including congressional ratification of trade agreements that would preempt state regulation of insurance for solvency purposes. Although NCSL continues to support the National Association of Insurance Commissioners’ Financial Regulation Standards and Accreditation Program, NCSL acknowledges that state legislatures and governors have the responsibility to enact policy, which state regulators enforce. NCSL recognizes that interstate compact proposals have the potential of addressing binding uniformity and effectiveness in specific areas of regulation.

NCSL also objects to actions taken or contemplated by the Internal Revenue Service or other federal agencies to assert priority claims to the assets of failed insurers. The states should first be allowed to distribute an insolvent company's assets to pensioners, family businesses, other policyholders and others protected by the McCarran-Ferguson Act’s delegation of the business of insurance to the states.

In the same vein, NCSL is concerned by federal bankruptcy rulings under the federal bankruptcy code that would allow alien insurers and reinsurers to move certain trust fund assets to bankruptcy proceedings in their domicile country. The trust funds established by alien insurers and reinsurers are to serve as collateral for insurance and reinsurance underwriting in the United States. Federal bankruptcy rulings have allowed such alien insurers and reinsurers to be exempt from state solvency regulation and have placed these collateral trust funds out of the reach of state insurance departments, which are solely responsible for solvency protection. NCSL urges Congress to rectify this situation by amending federal law to eliminate or limit this exemption for alien insurers and reinsurers under the bankruptcy code.

Insurance Information Security

NCSL opposes any federal effort to preempt state laws and regulations or to enact federal standards that address the use of financial and credit information in insurance.

Insurance Fruad-Federal Criminalization

NCSL recognizes the toll that policyholder and claimant initiated fraud has on the cost of insurance and the solvency of the insurer. We applaud the action taken in various states to pass laws that make it more difficult to file a false claim, increase the penalties for those who are guilty of fraudulent activities, and expand state insurance department fraud units.

NCSL believes that the prosecution of policyholder and claimant fraud should and must remain in the jurisdiction of state and local law enforcement officials. However, in cases of internal insurer fraud that may be the result of interstate and international conspiracies to defraud, loot or plunder an insurance company, states and the federal government should cooperate to prosecute such criminal activity.

As a result of financial services modernization, the various federal and state financial institutions regulators need to coordinate anti-fraud activities. However, federal legislation to assist the coordination of state and federal anti-fraud activities should not unnecessarily preempt state anti-fraud laws and regulations nor grant audit or subpoena authority to a federal entity over a state agency operating under appropriate state constitutions and laws.

NCSL's endorsement of federal involvement in the criminal prosecution of certain kinds of insurance fraud does not diminish our support for continued state regulation of the insurance business. Federal criminal sanctions will assist state regulators in state efforts to prevent future insolvencies.

Equal Access to FBI Criminal History Records

State regulators should have efficient access to the Federal Bureau of Investigation’s (FBI) Criminal Justice Information System in order to establish dependable procedures for licensing officers, directors, and agents of insurance companies across the United States.

NCSL calls on Congress to give state insurance regulators statutory access to FBI fingerprint files. This information is currently available to federal and state banking and securities regulators. Access will help safeguard insurance consumers from the unnecessary risk of having known fraud artists or violent offenders engaged in the insurance business.

Natural Disaster Mitigation and Insurance

NCSL urges Congressional action that would: (a) provide federal grants, tax credits or deductions to assist consumers to strengthen their homes to better withstand catastrophic natural disasters; and (b) create a commission to determine what other action is necessary and appropriate to support and enhance the ability of existing insurance and reinsurance mechanisms to cope with catastrophic natural disasters. However, any such action must not displace private sector risk transfer mechanisms, adversely impact a state's ability to levy premium taxes, regulate the business of insurance and set solvency standards for property and casualty insurers.

Terrorism Risk Insurance

NCSL requests Congress work with state insurance regulators to ensure that the property and casualty insurance and group life insurance industries develop the products to protect Americans from financial losses associated with terrorism and to ensure an available and affordable insurance market for American consumers and businesses.

NCSL continues to believe that any reauthorization of the Terrorism Risk Insurance Act should recognize the temporary nature of the program, and therefore encourages efforts to further promote development of the private insurance markets. Any federal plan for a temporary and limited federal backstop for terrorism insurance coverage must not adversely impact a state’s ability to levy premium taxes, regulate the business of insurance and set solvency standards for property and casualty and group life insurers.

Memorial Resolution in Support of Position Statement Recognizing Congressional Consent to the Interstate Insurance Product Compact

WHEREAS, it is well established that states have primary jurisdiction and responsibility for regulating insurance products offered by the life insurance industry to consumers in their respective jurisdictions; and 

WHEREAS, the National Conference of State Legislatures (NCSL) strongly supports rights of states to regulate their unique insurance markets while joining together to support targeted modernization initiatives that protect insurance consumers and streamline regulation; and 

WHEREAS, NCSL endorsed the development and implementation of the Interstate Insurance Product Regulation Compact (Insurance Compact) in 2004 and has actively supported its mission with NCSL legislators serving on the Insurance Compact Legislative Committee; and

WHEREAS, the Insurance Compact serves to bring states together to set national Uniform Standards that apply as the product requirements for life insurance, annuity, disability income, and long-term care insurance products, including requirements that in certain cases may differ from state-specific product requirements; and

WHEREAS, the Insurance Compact is an instrumentality of the states serving as a central clearinghouse for prompt and thorough product review and approval while preserving state authority over all other areas of insurance regulation—including agent licensing, market conduct, company licensing and solvency regulation—as well as preserving applicable state filing fee revenues; and

WHEREAS, since it became operational in 2006, the Insurance Compact has demonstrated sustained growth in the number of Compacting States, the number of Uniform Standards for the authorized product lines, the number of filing companies and product filings and has transformed the state-based product filing platform for Compacting States, their regulated entities and insurance consumers.

WHEREAS, the Compacting States represent 46 jurisdictions comprising more than 70 percent of the nationwide premium volume for asset-protection insurance products; and 

WHEREAS, more than 100 product Uniform Standards prepared and adopted by the Insurance Compact member states have fulfilled the promise of stringent and detailed requirements administered by knowledgeable, professional staff, with over 12,000 insurance products reviewed and approved for use in the Compacting States; and

WHEREAS, states’ legislatures determine the extent and authority of participation in the Insurance Compact, and further exercise their sovereign authority and rights, through their legislatively designated representative to the Insurance Compact, who serves on the Compact Commission, its governing body; and

WHEREAS, the Insurance Compact has become an extremely important part of the fabric of state-based product regulation for these authorized insurance products; and

WHEREAS, a recent court opinion by the Colorado Supreme Court found that congressional consent to an interstate compact would affect whether states could join together to embrace provisions in duly promulgated uniform standards that may differ from state laws; and

WHEREAS, it is well-established in interstate compact case law that regulations adopted by states pursuant to an interstate compact with congressional consent can apply when different from state law; and

WHEREAS, the Insurance Compact is considering adoption of a position statement known as Position Statement 1-2022 to document that Congress conferred implied consent for the Insurance Compact in 2006 in the form of Public Law 109-356 enacted by Congress and signed by President George W. Bush, which authorized the District of Columbia to enter the Compact, and approved the delegation of authority necessary for the Commission to achieve the purposes of the Compact; and 

NOW, THEREFORE BE IT RESOLVED that NCSL reaffirms its endorsement of the Insurance Compact as the legislative-regulatory state-based solution to making the product submission, review, and approval process more uniform, efficient, and robust across states; and 

BE IT ALSO RESOLVED that NCSL agrees that the Compact Commission, working with legislators, regulators, and others in Compacting States, should take action to further strengthen and inform on the legal foundation of the Insurance Compact, an interstate agreement among the states requiring passage by their respective legislatures; and

BE IT FURTHER RESOLVED that at the recommendation of the Insurance Task Force of the Communications, Financial Services and Interstate Commerce Committee, NCSL supports the adoption by the Compact Commission of Position Statement 1-2022 acknowledging implied congressional consent was given to the Insurance Compact in 2006; and 

BE IT FINALLY RESOLVED that a copy of this Resolution shall be distributed to the Office of the Interstate Insurance Product Regulation Commission with instructions to distribute to its members, members of the Legislative Committee and members of its Consumer and Industry Advisory Committees.

Online Child Privacy Protection

WHEREAS, the internet presents certain risks for children under the age of 13 years who may not be able to recognize dangerous situations online.; and

WHEREAS, Congress passed the Children’s Online Privacy Protection Act of 1998 (COPPA) to limit personally identifiable information from children without their parents’ consent. In 2000, the Federal Trade Commission (FTC) issued a rule implementing COPPA that requires websites to post a complete privacy policy, notify parents directly about their information collection practices, and obtain verifiable parental consent before collecting personal information from their children or sharing it with others; and

WHEREAS, since COPPA’s enactment, research on children’s mental health and their online interactions has become available, showing a disturbing increase in youth mental health issues commensurate with social media presence. Studies have found that youth who spend over three hours per day on social media have double the risk of experiencing poor mental health outcomes such as depression and anxiety; and

WHEREAS, full compliance with COPPA has yet to occur and it has become a concern of the states to protect children online as their presence on social media platforms and other online websites has increased significantly since COPPA’s enactment and the FTC promulgated its rule; and

WHEREAS, states have begun to introduce and enact legislation to provide enhanced protections for children on the internet; and

NOW THEREFORE BE IT RESOLVED that, given that Congress has already established a baseline structure for regulating content shown to children, and that there is a federal agency in place to establish a regulatory framework, NCSL supports updating COPPA to reflect current concerns, encouraging compliance within the private sector, and creating reasonable federal standards to better protect children’s data that recognize important state interests and do not preempt state laws or create unimplementable, burdensome, or costly mandates for states.

Remote Commerce

The 1967 Bellas Hess and the 1992 Quill Supreme Court decisions denied states the authority to collect sales and use taxes by out-of-state sellers that have no physical presence or nexus in the taxing states, and urged Congress to address the issue of remote sales tax collection. It is estimated in various studies that state and local governments are losing between $8 billion to $35 billion a year in uncollected sales taxes from remote transactions and that annual losses will continue to grow as more commerce is conducted online. Congress’ failure over the last 26 years to address the issues raised by the Supreme Court in 1992, resulted in an effort by states to require remote sales tax collection based on economic presence. The first case ready for review by the Supreme Court, South Dakota v. Wayfair, resulted in the Court overturning its previous decisions in Bellas Hess and Quill, which allowed states to require remote sellers to collect sales taxes for purchases made by their residents. The Wayfair decision by the Supreme Court has made the need for congressional action unnecessary.

Having state tax sovereignty returned to the states for sales tax collection, states now have the obligation to act with fairness and transparency in administering the remote sales tax collection system. The responsibility will be on states to ensure that the burden to collect sales taxes by remote sellers is no greater than the burden on in state sellers if states are to avoid a preemptive federal framework imposed by Congress. States must work together as partners in the collection of sales taxes or face a call from sellers for federal intervention. Action by state tax departments regarding remote sales tax collection without the consent of the elected policymakers in the state legislature and executive branch should be avoided.

NCSL recognizes that 24 states have enacted legislation to join the Streamlined Sales and Use Tax Agreement (SSUTA), which was recognized by the Supreme Court in the majority opinion as a viable way for states to collect remote sales taxes. While it is an option for the remaining 21 states that have a sales tax, it is not mandatory. However, those 21 states should consider joining SSUTA or consider enacting legislation to work with SSUTA for: a central registration system for remote sellers, a central system for the certification of Certified Software Providers (CSPs), ensure that remote sellers are provided the same compensation as in-state sellers, provide a publicly available taxability and exemption table, and, provide a rates and boundary database in an easily downloadable format.

States won a victory in the U.S. Supreme Court and now they have a responsibility to ensure that sellers are treated with fairness and as good corporate citizens. States should follow the Golden Rule of state tax policy: “Do unto taxpayers in other states as you would have them do unto your taxpayers.” Any state that implements remote sales tax collection irresponsibly will only jeopardize the ability of other states to require remote sales tax collection.

Moreover, NCSL will oppose unnecessary federal legislation that preempts the states’ authority, as granted by the Supreme Court, to collect sales taxes from remote sellers.

Student Athlete Compensation

In 2019, California became the first state to pass legislation that would allow student athletes compensation for the use of their name, image, or likeness (NIL). The laws would allow students in varying ways to sign endorsement deals, earn money for public appearances, sell autographs or other items, and enter deals with companies for marketing purposes. Over half of the states have taken similar action since then. Numerous bills have been introduced in Congress that would provide a system for how student athletes can negotiate contracts and otherwise profit off their NIL. NCSL urges consultation with the states on all these issues.

NCSL strongly supports the ability of the states to determine the best system for their student athletes. NCSL opposes any efforts by Congress to preempt state laws that provide earning rights to students and believes that any federal legislation should be complementary to state laws.

State Sovereignty for Gaming 

The National Conference of State Legislatures (NCSL) believes that the federal government must respect the sovereignty of states to allow or prohibit games of chance and skill within their borders.

Internet Gambling

The National Conference of State Legislatures (NCSL) believes the federal government must respect the sovereignty of states to allow or to prohibit Internet gambling by its residents.

The 2011 ruling by the United States Justice Department on the Federal Wire Act of 1961, 18 U.S.C. §1084, clarifies that intra-state online gambling is lawful. Any effort by Congress or the administration to reverse this ruling is preemptive and diminishes the flexibility of state legislatures to be innovative and responsive to the unique needs of the residents of each state.

NCSL requests Congress to consider the perspective of the states as it examines this issue and asks that it involve state legislators in any federal efforts that seek to reform the regulation of online gaming. NCSL strongly opposes any effort by the federal government to overturn the Justice Department’s ruling or consideration of legislation overruling state authority by legalizing or regulating gambling at the federal level. NCSL also requests that federal lawmakers be respectful of state legislatures that prohibit online gaming or other forms of gaming within their state.

Sports Gambling

The National Conference of State Legislatures (NCSL) believes the federal government must recognize the sovereignty of states to allow or to prohibit sports gambling by its residents.

On May 14, 2018, the Supreme Court of the United States declared the Professional and Amateur Sports Protection Act (PASPA), 28 U.S.C. §§ 3701-3704, unconstitutional as violative of the Court’s 10th Amendment anti-commandeering jurisprudence. The Court’s judgement on PASPA exemplifies the failings of a one-size-fits-all federal solution to complex questions of policy, regulation and law enforcement. With the shackles of federal preemption removed, states can begin creating innovative and tailored sports gambling policies that represent the will of voters.

The choice to legalize sports wagering is an important policy question, the answer to which is different among our nation’s diverse states. Forcing state policy flexibility and innovation to retreat under threat of federal preemption not only undermines the basic tenants of our nation’s founding documents, but it strains state-federal relations and suppresses the direct will of voters. Conversely, by encouraging state policy innovation and unique legislative solutions, federalism is strengthened and voters are more engaged with the legislative process.

NCSL requests Congress respect the sovereignty of states to regulate and tax sports gambling in the current post-PASPA environment. This includes not preempting states’ legislative authority to legalize, regulate and tax sports gambling activities. NCSL also requests that federal lawmakers respect state legislatures that chose to maintain their prohibitions on sports gambling and other forms of gambling within their state.

Daily Fantasy Sports

The National Conference of State Legislatures (NCSL) believes the federal government must respect the sovereignty of states to allow or to prohibit daily fantasy sports by its residents.

The Unlawful Internet Gambling Enforcement Act of 2006 specifically excludes a fantasy or simulation sports game that “has an outcome that reflects the relative knowledge of the participants, or their skill at physical reaction or physical manipulation (but not chance), and, in the case of a fantasy or simulation sports game, has an outcome that is determined predominantly by accumulated statistical results of sporting events”. Therefore, NCSL will oppose any effort by Congress or the administration to diminish the flexibility of state legislatures to be innovative and responsive to the unique laws and regulations of each state.

NCSL strongly opposes any effort by the federal government that would overrule state authority by regulating daily fantasy sports at the federal level. NCSL believes the federal government must recognize the sovereignty of states to regulate and tax daily fantasy sports. NCSL also requests that federal lawmakers be respectful of state legislatures that prohibit daily fantasy sports within their state.

Supporting the Affordable Connectivity Program (ACP) Through Permanent Congressional Funding

WHEREAS, internet connectivity is essential to the success of families, businesses, and government services; and 

WHEREAS, Congress created the Affordable Connectivity Program (ACP) in 2021 to make broadband service and connected devices available to lower-income households at discounted prices from providers that opt to participate in the program; and

WHEREAS, ACP has enabled low-income individuals and families to access online educational resources, gain employment opportunities, access vital services such as telehealth and government assistance, and participate in our civic life; and

WHEREAS, as of July 2023, more than 19 million low-income American households rely on support from ACP for access to the internet, and growing, many of whom receive broadband access effectively free after the ACP discount; and

WHEREAS, after state and federal broadband expansion investments, the ACP will help more Americans, including persons of color and residents in rural communities, stay connected; and

WHEREAS, many states are requiring recipients of the Department of Treasury’s Capital Projects Funds to participate in ACP; and 

WHEREAS, states and territories may require recipients of Broadband Equity, Access, and Deployment (BEAD) funding to participate in ACP or any successor program; and 

WHEREAS, current ACP funding could be exhausted in early 2024; and

WHEREAS, allowing funding for the ACP program to lapse will impose a hardship on the millions of families that rely on such support to secure broadband services that are necessary for jobs, for homework, and for staying connected with loved ones; and

WHEREAS, in addition to impacts on broadband adoption, the end of ACP would also impede the success of ongoing federal and state efforts to close the digital divide through the construction of new infrastructure to help reach those in unserved and underserved parts of the country; and

WHEREAS, it is crucial for Congress to prioritize the continuity and sustainability of ACP to ensure that low-income American families can continue to afford broadband internet access service; and

NOW, THEREFORE BE IT RESOLVED that the National Conference of State Legislatures urges Congress to fund the ACP program to ensure the continuation of the program ensuring that all Americans can have access to broadband service; and

BE IT FINALLY RESOLVED that a copy of this Resolution be sent to the President of the United States and all members of Congress.



Deployment and Adoption

Internet connectivity is essential to the success of families, businesses, and government services. NCSL urges Congress and the administration to invest in universal internet connectivity, provide flexibility to states in federal programs and funding, and initiate proactive, meaningful engagement and consultation with states during the process of program development and implementation. NCSL also encourages prioritization of anchor institutions in federal funding and programs, as these schools, libraries, and hospitals are often cornerstones of community access. NCSL further recognizes the special challenges of middle and last mile deployment and encourages Congress and the administration to provide support to communities working towards universal service.

Federal funding and deployment programs should also address affordability and access among rural, unserved, and minority communities. NCSL urges Congress and the administration to provide targeted resources for reducing the digital divide, such as digital inclusion funding, training, and digital literacy. NCSL further encourages funding for tribal connectivity.

NCSL urges investment in wireless connectivity and facilities deployment, especially in unserved and underserved communities. NCSL further encourages investment in telecommunications workforce and advanced communications technology education and training.

Mapping and Data Collection

Fair, efficient deployment of internet services is dependent on accurate mapping of speeds, adoption rates, and coverage. NCSL encourages the federal government to ensure readily available data and technical support for accurate mapping. We also urge Congress and the administration to provide sufficient funding for mapping and to continue to provide easy-to-use, free online maps available to states and consumers. NCSL recognizes the importance of protecting states’ ability to do their own data collection and ensure accuracy of deployment maps.

Technology and Smart Communities

Telecommunications technologies are constantly evolving, and states are finding increasingly innovative ways to deploy connected devices. NCSL encourages additional federal investment in the development of smart communities. We further urge federal support for emerging telecommunications technologies, including those with applications in telehealth, agriculture, smart infrastructure, and transportation. NCSL also recognizes the need for investment in devices and connectivity equipment for anchor institutions.

Federal Funding and Cooperation

The federal government, including Congress, the Federal Communications Commission, National Telecommunications and Information Administration, and the U.S. Department of Agriculture, must work in close partnership with states to reach universal adoption. NCSL recognizes the essential leadership role of state policymakers and regulators as many states have created broadband offices, task forces, commissions, agencies, or frameworks. It is essential that federal regulatory agencies participate in meaningful engagement and consultation with states in the development and implementation of federal programs. NCSL encourages state legislature representation on federal advisory committees and boards that oversee broadband and consumer protection issues.

NCSL urges Congress and the administration to provide predictable, stable, and sufficient funding for internet connectivity programs. If Congress enacts financing opportunities, NCSL supports state flexibility in financing options in addition to sufficient program funding. We further emphasize the importance of partnership and communication in funding decisions.

NCSL encourages responsible, nimble, and fair federal spectrum management as well as meaningful engagement and consultation with states when determining the best use for spectrum.


NCSL recognizes that communications tax policies should encourage a level playing field between communications service providers, enhance economic development, and avoid discrimination between new and existing providers. Other than the prohibition of taxes on internet access, NCSL opposes federal action that preempts the ability of states to determine their own tax policies in all areas, including communications services, unless where specifically supported by other NCSL policies.

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