The lack of access to banks and financial institutions is one of the largest challenges that American canna-businesses face today, and as the industry continues to expand, a growing number of pro-cannabis lawmakers have stepped up with possible solutions. Federal law currently prohibits banks from handling funds connected with illegal drugs, forcing cannabis firms to operate as cash-only businesses and preventing them from taking out loans or receiving the same tax cuts that other businesses do.
In an attempt to solve the cannabis industry's banking problem, Rep. Dave Joyce proposed the Safe Banking Amendment, a rider to the Fiscal Year 2019 budget bill that would protect banks willing to serve canna-businesses for the duration of that fiscal year. This Wednesday, the House Appropriations Committee held a heated debate over the amendment, with 19 lawmakers standing up to argue for or against the banking protections.
The Safe Banking Amendment would have prohibited the U.S. Department of Treasury from doing anything to "penalize a financial institution solely because the institution provides financial services to an entity that is a manufacturer, producer, or a person that participates in any business or organized activity that involves handling marijuana or marijuana products" that are legal in the state of origin, Forbes reports.
Earlier this year, Rep. Joyce took the language from the Rohrabacher-Blumenauer amendment, an annual budget rider protecting state-legal medical cannabis businesses from the federal government, and proposed that the appropriations committee add it to the 2019 budget bill. The committee supported these protections with a strong vote, but Joyce's attempt to push the Safe Banking Amendment had no such luck.
The committee voted against including the amendment in the budget bill. After the vote, Joyce revised the amendment, creating a new version which only protected banks dealing with medical, not recreational marijuana. After a short debate, Chairman Rodney Frelinghuysen demanded that Joyce withdraw the measure three times, and Joyce eventually acquiesced.
"The defeat of the Safe Banking Amendment was not a vote about marijuana, but rather it was about normalizing a nascent industry that serves hundreds-of-thousands of customers in the majority of U.S. states where cannabis is currently regulated," Justin Strekal, political director of NORML, said in a statement. "Once these companies have an easier time conducting their day-to-day operations, then they should be willing to offer more consumer-friendly prices instead of inflating them at the point of sale to cover backend costs associated with operating as an all-cash business."
It seems unlikely that this amendment will have a chance of success this year, but other legislation currently in the works may offer a partial solution to canna-banking. The STATES Act, proposed by Senators Elizabeth Warren and Cory Gardner and supported by a bipartisan coalition of state governors and even (tentatively) by President Trump, would prevent the federal government from interfering with any state that has legalized weed.
The STATES Act would also modify federal law so that funds connected with state-legal cannabis operations would no longer be considered illegal drug proceeds, allowing banks to service these industries without being subject to prosecution for money laundering. But although this legislation would take steps towards solving these banking issues, "it's likely not a silver bullet for the banking problem," California cannabis attorney Nicole Howell Neubert said to the Associated Press.
"Most financial institutions will be looking for even more affirmative direction from [Washington] to feel comfortable with banking cannabis companies," she added. Even if the act passes, banks who choose to serve the cannabis industry would still face a number of risks. Julie A. Hill, professor at the University of Alabama School of Law, explained that the Bank Secrecy Act, which requires that banks learn about their customers well enough to ensure they are not money launderers, could also pose a problem.
"This likely means that a bank accepting marijuana money would have to do enough research to know that their customers are complying with state law regarding the sale of marijuana," Hill said. "The bank would likely have to confirm that the marijuana is not sold to minors or sold for transport to states where it is illegal," and the cost of conducting this research would be an additional expense for banks.
Despite these roadblocks, cannabis advocates in public office are still brainstorming solutions to the problem. Another cannabis banking bill, the SAFE Banking Act, has also been proposed in both chambers of Congress by Rep. Perlmutter and Senator Merkley.