Yesterday was a big day for the American marijuana industry, as the U.S. House of Representatives held its first hearing on shoring up banking services to legal marijuana-related businesses. Even though marijuana is legal in some form in about two-thirds of US states, it’s still illegal federally and classified as a Schedule I drug. That puts it on par with the likes of heroin and LSD, and has made banks wary of taking on marijuana businesses as customers even in states where it has been legal for years. Banks view the regulatory burdens as too onerous and the risks too great, such as potentially being charged with money laundering.
This has forced many legal marijuana businesses to conduct their businesses largely in cash. Not only does this pose serious safety risks like robberies by handling so much money day-to-day, but store operators also can’t take advantage of tax breaks, credit cards, and loans routine to any other legal American business. It also makes it tougher for them to pay taxes. That’s why Colorado Democratic Representative Ed Perlmutter has been proposing a bill to fix the matter for years. His state was the first of any to sell recreational marijuana, so he’s seen the ramifications from the industry’s lack of banking access first hand.
The House Financial Services subcommittee finally just took up his proposed legislation, a feat enabled by the Democrats taking back the House as it couldn’t get a hearing with Republicans. The bill is co-sponsored by Washington Democratic Representative Denny Heck, whose state was the second to start selling retail cannabis. Here’s some details about the bill:
- It is called the “Secure And Fair Enforcement Banking Act of 2019” or the “SAFE Banking Act of 2019”.
- It would “create protections for depository institutions that provide financial services to cannabis-related legitimate businesses, and for other purposes.”
- Regulators wouldn’t be able to “prohibit, penalize, or otherwise discourage a depository institution from providing financial services to a cannabis-related legitimate business.”
- Essentially, it would shield banks from legal actions related to providing its services to marijuana businesses if they are operating in a state where it is legal. You can read the bill here.
As for what lawmakers, bank officials, and industry advocates had to say at the hearing, here’s some highlights from press accounts:
- Washington-based State Bank Northwest President Gregory Deckard on how even unrelated businesses who just provide services to marijuana businesses get impacted: “We have a major energy provider. Naturally, their customers include cannabis-related businesses… For that reason alone, my bank cannot bank this utility without assuming legal risk and additional compliance burdens.”
- Rep. Denny Heck (D-WA) regarding the safety issues of businesses operating with lots of cash: “We have the power in this committee to prevent murders and armed robberies, and we must use it, we must use it now.”
Major Neill Franklin of the Law Enforcement Action Partnership on the risks of some employees earning upwards of a few thousand dollars every two weeks: “I fear dispensary employees being at great risk.”
As a side note, these are not exaggerations. We’ve surveyed numerous dispensaries in Colorado since they were first allowed to sell recreational marijuana five years ago. The headaches and dangers of cash were consistently brought up during most of our conversations. As one example, a former US Marine who was working as a security guard at a cannabis dispensary in Aurora, Colorado was shot and killed during an attempted robbery a few years ago, leaving behind a wife and three young kids.
- Mason Tvert of the advocacy group, Marijuana Policy Project: “Lawmakers are not being asked to weigh in on whether marijuana should be legal or not. They are simply looking at whether banking services should be available to these businesses in states where it is already legal.”
- Ranking Republican on the subcommittee, Blaine Luetkemeyer: “Today we are discussing the merits of allowing federally illegal businesses to access banking services… As far as I know, the House Financial Services Committee does not have jurisdiction over descheduling a drug.”
Although the bill could potentially pass in the House since its controlled by the Democrats, traction in the Senate is more uncertain. Even though Senate Majority Leader Mitch McConnell successfully pushed to legalize hemp last year, he made his opinion on marijuana clear: “I do not have any plans to endorse the legalization of marijuana.” He’s stated that hemp “is a different plant. It has an illicit cousin which I choose not to embrace.”
But as California Treasurer Fiona Ma said, the measure is “a critical step for the rapidly expanding industry”. We will, of course, keep you updated on where this bill goes from here.