Congressional hearing on marijuana banking boosts industry hopes for reform, but passage far from assured

marijuana banking, Congressional hearing on marijuana banking boosts industry hopes for reform, but passage far from assured

(This story has been updated to include a statement from the American Bankers Association.)

Major issues facing the cannabis industry, such as limited access to banking services, have stalled in Congress without even getting a hearing, much less a floor vote.

That will change Wednesday, when a subcommittee of the now-Democratic-controlled House Financial Services Committee hears testimony on the difficulty legal cannabis businesses have opening and maintaining bank accounts.

The hearing – which also will look at proposed cannabis banking legislation that the banking industry supports – is only the first step in getting a measure passed.

But it’s seen by the cannabis industry as a significant development – although any legislation that passes the House will face a bigger challenge in the Republican-controlled Senate.

“It’s a new Congress, with new leadership in the House, and I think we have a real shot getting this issue resolved this session. … That’s why we’re seeing this hearing so early in the year,” said Aaron Smith, executive director of the National Cannabis Industry Association.

The NCIA has been collecting written testimony from its members to submit to the subcommittee.

Industry officials such as Smith say they believe the banking issue may be one of the most promising ones to tackle this congressional session because it has a public safety consequence: Cash-only businesses attract crime.

“It’s a real public-safety hazard,” Smith said. “You still have employees who walk around with large sums of cash to pay utility (and other) bills.”

The initial witness list includes:

  • Corey Barnette, owner of District Growers Cultivation Center & Metropolitan Wellness Center in Washington DC.
  • Gregory Deckard, a bank executive speaking on behalf of the Independent Community Bankers of America.
  • California state Treasurer Fiona Ma.

The hearing will include a discussion of the draft “Secure and Fair Enforcement Banking Act of 2019,” the so-called SAFE Banking Act. Click here for information about the hearing and a link to the webcast.

Democratic Reps. Ed Perlmutter, of Colorado, and Denny Heck, of Washington state, have filed the bill in previous congressional sessions dating six years but failed to get a hearing.

The draft bill, among other things, would prevent a federal banking regulator from:

  • Terminating or limiting the deposit insurance of a federal financial institution solely because it provided services to a legal cannabis business.
  • Prohibiting, penalizing or discouraging banks from providing services to legal marijuana businesses.
  • Taking adverse action on a loan made to a legal cannabis business.

A major banking group, the American Bankers Association, told the subcommittee in a statement “the SAFE Banking Act would be an important first step toward enabling financial services for cannabis-related businesses.”

The ABA noted that while a small number of banks have decided to take the risk of serving those businesses, “the majority of financial institutions will not take the legal, regulatory or reputational risk associated with banking cannabis-related businesses without congressional action.”

The group, citing the risk of theft and crime related to cash enterprises, said that cannabis businesses would be “safer and better regulated” and communities better protected if state-legal MJ businesses were allowed to use the banking system.

Perlmutter’s office noted in a news release that U.S. Treasury Secretary Steven Mnuchin has supported the idea of allowing MJ businesses to have bank accounts.

Mnuchin, in a speech before the House Financial Services Committee a year ago, said he didn’t want legal marijuana businesses to have to carry around “bags of cash” to pay their employees.

(For additional coverage of this topic, click here.)

Jeff Smith can be reached at [email protected]

3 comments on “Congressional hearing on marijuana banking boosts industry hopes for reform, but passage far from assured
  1. Dave Kaye on

    Amen, hopefully the reality of this massive and indisputable problem resonates with our elected officials.

    Having been targeted by a theft ring of convicted felons, lack of banking has created tremendous safety issues – not to mention our inability to deposit payroll taxes electronically. As a result, the IRS charges a 10% penalty.

    The time has come for regulators to remove the target from our backs and allow the industry to utilize banking. While they’re at it, 280E must be abolished. If our legislators aren’t paying six figure tax liabilities on a minimum wage salary, why must I?

    • ocpaul on

      Well said. Additionally, allowing credit and debit card purchases would be safer for customers as well. And it would probably boost sales too.
      How does Canadian Banking handle their new cannabis industry?

      • TM on

        We can buy with credit/debit cards and of course cash. Banking is not an issue here. Even though I think our politics whether provincial or federal here is, lets just say, I have to give my head a shake once and while and go “Huh….What”. I just have to say this, your so called great leader will probably use this issue as a bargaining chip down the road for something he wants or nothing will pass until after the 2020 Pres election once he is, hopefully, gone!!!!! Your federal government, most of your elected officials anyways, in my opinion is a joke, states do a better job at regulating the industry and should be able to develop there own banking platforms. Get AOC on their case!!!

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