There may be a light at the end of the tunnel for the cannabis industry’s banking problem. According to a Politico report on Monday, congressional Democrats are planning to hold a House Financial Services Committee hearing next week to discuss potential solutions to the issue. Furthermore, Marijuana Moment reports that its sources claim that preparations are underway for a “full committee markup” on the topic in the coming months.
If passed, the Secure and Fair Enforcement— SAFE Banking Act (H.R. 2215 & S. 1152), will protect financial institutions doing business with state-legal cannabis operations.
Because marijuana is still federally illegal, most banks aren’t willing to take the risk of doing business with cannabis companies. As a result, many have vast stockpiles of cash. It’s a risky and highly inconvenient situation. And it also costs banks money. Furthermore, most marijuana businesses cannot accept credit cards. Nor can they write checks or make wire transfers.
Often taxes are paid with huge piles of cash. In September, Forbes reported on a Nevada medical marijuana dispensary that sent in a picture of $2 million in $20 bills being prepared for hand-delivery to the Internal Revenue Service to pay taxes.
According to reports, Wednesday, February 13 was being considered for a hearing on the matter. That date is one day shy of five years since the Obama administration’s Treasury Department issued a memo on Valentines Day encouraging banks to work with the cannabis industry. The memo had little effect on the problem as most banks have opted to wait until Congress, itself, gives the all clear. Also as a result of Federal banking restrictions, cannabis firms cannot list on the U.S. stock exchanges.
“This arcane set of circumstances is setting up Canadian investors to get rich from the success of the U.S. cannabis market. In fact, Canadian finance firms are already setting up options contracts to be able to buy shares in cannabis firms in the future, once prohibition ends. Unless Washington wants to clamp down on the growth of one of the fastest-growing industries in the U.S. and hand over control of that sector to our Canadian neighbors, it’s time for sensible banking laws.” — Acreage Holdings CEO Kevin Murphy for Forbes
Little progress has been made
Lawmakers in Washington D.C. have been trying to fix the problem for years, but a Republican-led Congress has consistently blocked cannabis legislation of any kind. However, the balance has shifted in the House and Democrats are planning to gain some headway on federal cannabis policy.
A little over a year ago, the number of banks that appeared willing to work with the cannabis industry shrank back a bit after U.S. Attorney General; Jeff Sessions rescinded Obama era guidance on the matter. The number began to rise again in the Spring of 2018.
According to a report in Forbes, 411 banks and credit unions in the U.S. were "actively" operating accounts for marijuana businesses by the end of March, up more than 20% from President Trump’s inauguration. Then in mid-2018, a congressional committee voted to kill an amendment that would have protected banks that work with marijuana businesses.
Shortly before the 2018 midterm election, Oregon Democrat Rep. Earl Blumenauer distributed a memo to Democratic leadership outlining a step-by-step approach to ending federal cannabis prohibition. Solving the banking issue is among the topics outlined for discussion in the memo.
I co-sponsored the Secure and Fair Enforcement Banking Act (SAFE Banking Act) to ensure legitimate cannabis businesses have access to capital without fearing government retaliation. https://t.co/PylJaDwn0C https://t.co/QbjYwZTT6k
— Rep. Scott Peters (@RepScottPeters) January 3, 2018
In October 2018, the American Bankers Association, the largest group representing U.S. banks, emailed a survey to its members asking them "to help illustrate to regulators and legislators the need for greater clarity" on the banking issue. The survey asked members to “provide an example of a situation where you had to close an existing account, terminate a banking relationship or turn away a potential customer due to their association with marijuana.” The intent of the survey was to gather information that could be used in lobbying Congress to handle the situation.
In November of 2018, cannabis banker, Sundie Seefried spoke to attendees at MJBizCon and complained that the regulations and paperwork that come with doing business with cannabis companies was driving up costs. Seefried said Partner Colorado Credit Union had filed more than 7,000 reports with regulators on behalf of 220 cannabis-related companies compared to only 226 reports for 33,000 regular members of her. “When you ask me why banking is expensive — what you are really paying for are all the bodies it takes to file 7,000 reports,” she said.
Then in December of 2018, Sen. Cory Gardner reintroduced the STATES Act, a measure designed to protect the interests of states with marijuana industries allow them to regulate their own industries without the fear of federal harassment. The States Act would have enabled basic banking services for the marijuana industry.
Gardner attached the STATEs Act as an amendment to the First Step Act, a criminal justice reform bill that was widely expected to be signed into law. The amendment was nixed by Kentucky Republican and Senate Majority Leader Mitch McConnell. It was not the first time McConnell had thwarted attempts at federal cannabis reforms.
The executive branch goes in on the action
Outside of Congress, top Washington players are also calling for reforms. In mid-January, Joseph Otting, a federal Treasury Department official called on Congress to solve the banking problem by 2020, if not sooner. Otting told reporters at the time, “[lawmakers] have to act at the national level to legalize marijuana if they want those entities involved in that business to utilize the U.S. banking system.”
Also, Treasury Secretary Steven Mnuchin has said that the banking problem is a top concern and called the current situation “untenable.” Mnuchin told a House committee, “I assure you that we don’t want bags of cash. We do want to find a solution to make sure that businesses that have large access to cash have a way to get them into a depository institution for it to be safe.”
Another bill in the house, H.R. 420, aka the Regulate Marijuana Like Alcohol Act, introduced by Blumenauer, would remove marijuana from the Schedule I list of controlled substances. The measure would relieve the Drug Enforcement Agency and Department of Justice of their cannabis policing responsibilities and give that duty to the Bureau of Alcohol, Tobacco, Firearms, and Explosives. If this measure passes, it could have the effect of eliminating the risk for banks.
Cannabis concerns are also sending veteran lobbyists to Washington in support of the bipartisan STATES Act, introduced last summer by Democratic Senator Elizabeth Warren and Cory Gardner, a Republican — a bill which President Trump says he will support.
The National Cannabis Industry Association sent out a newsletter recommending that its members take action to encourage Washington lawmakers to support the SAFE Act. The NCIA is encouraging all stakeholders to, “call your Congressional Representative and tell them that you support safe banking services for legal cannabis businesses.” Information on how to contact your congressional representatives can be found here on the NCIA website.