For the better part of a decade, marijuana has been recreationally legal in a few states, and it’s been legal for medicinal purposes in other states for even longer. As of now, over half the states in the Union allow for legal use of marijuana in some form or other, and yet, national banks will not touch them.
But the day has come when that may start to change. The problem was that, even though marijuana is legal in some states, most banks are federally insured, and marijuana is still very much illegal at the federal level. Because of this, FDIC insured banks have been hesitant to work with cannabis businesses for fear that their Federal watchdogs will do more than snarl at them.
On Wednesday, however, the U.S. House of Representatives, in subcommittee, considered the subject of solving this problem for the first time. Many insiders are touting this as a huge step forward. Rep. Ed Perlmutter (D-CO), specifically referred to it as a “big deal.” Rep. Perlmutter has been working on this problem for years, as his state was one of the first two to legalize marijuana recreationally nearly seven years ago.
The Secure and Fair Enforcement Banking Act of 2019 – referred to as the SAFE Banking Act, aims to ensure that banks and bank employees cannot be punished for serving cannabis businesses that comply with applicable state laws.
Up to now, some weed-legal states have provided laws to allow local state-level banks to work with cannabis retailers or employees, but even that can be a headache, according to one such institution, State Bank Northwest, based in Washington.
State Bank Northwest’s President, Gregory Deckard explained to committee members the reasons that many banks – even the local ones – have problems with the current system. “We have a major energy provider,” he said. “Naturally, their customers include cannabis-related businesses. For that reason alone, my bank cannot bank with this utility [under current law] without assuming legal risk and additional compliance burdens.”
Without banks willing to do business with them, cannabis businesses are forced to operate on a strictly cash basis – which, in addition to being idiotically inconvenient, is a huge safety risk. Fiona Ma, California’s state treasurer, testified to the committee that some cannabis businesses had driven hundreds of miles to drop off duffel bags full of cash at government offices just to pay their taxes.
Congressional representatives and law enforcement spokespeople alike testified to the safety risks of the current cash-based system. One law enforcement activist pointed out that a two-week paycheck for a cannabis business employee could be a few thousand dollars, which puts them in danger of being robbed or worse. As for what the changes to the law will eventually look like, it’s too early to say.
Many Republicans point out that acting now, while marijuana is still illegal at the federal level will just cause confusion later – implying that federal legalization is imminent and that the issue should be tabled until full federal legalization takes place.
Still, attitudes of some prominent conservatives are changing. Former Speaker of the House John Boehner now leads a pro-cannabis lobbying group, even though he once vehemently opposed legalization. Other politicians are being more open about their past experiences with the drug, and are responding to an obviously shifting public opinion on the issue.
Bottom line: progress at the federal level is still slow, but moving in a positive direction for cannabis businesses. This week’s hearings represent a positive step toward legitimizing – if not federally legalizing – the cannabis industry.