Banking associations from 49 states and Puerto Rico sent a letter to the chairman and ranking member of the Senate Banking Committee on Friday, imploring them to advance a bill protecting financial institutions that service state-legal marijuana businesses.
In the letter to Sens. Mike Crapo (R-ID) and Sherrod Brown (D-OH), the groups stressed that they are not taking a stance on the broader question of cannabis legalization but support House-passed legislation preventing federal regulators from penalizing banks solely because they work with marijuana companies.
They urged a markup of the Secure and Fair Enforcement (SAFE) Banking Act, was was approved along largely bipartisan lines in the House last year.
While more states have moved to legalize cannabis in one form or another, “current federal law continues to prevent banks from safely banking these businesses without fear of federal sanctions,” the associations wrote.
“As a result, this segment of our local economies is forced to operate on an all-cash basis, which creates serious public safety, revenue administration, and legal compliance concerns in the communities we serve. The impact on our local economies could also prove significant, as revenue paid to unrelated industries that provide products and services to state-authorized cannabis businesses such as law firms, accountants and contractors is technically money derived from illegal activities, and thus could be considered money laundering.”
The groups, which include banking associations representing every state except Kentucky, added that the ongoing confusion over existing policy conflicts “raises significant questions” about whether financial institutions can serve ancillary businesses that don’t directly deal with marijuana but may market products and services used by the industry.
50 state bankers associations have written @MikeCrapo @SenSherrodBrown encouraging @SenateBanking @BankingGOP to advance the #SAFEBanking Act, which will help banks better serve customers in states where cannabis is legal. Read the letter: https://t.co/pA1Rg6HIUz
— American Bankers Association (@ABABankers) March 6, 2020
“Without a change to federal law, that entire portion of economic activity in legal cannabis states may be marginalized from the banking system,” they wrote. The SAFE Banking Act “respects state sovereignty and does not facilitate cannabis sales in states that have chosen not to legalize the drug.”
“Although there are admittedly broader public policy questions at play, we ask that you evaluate and address this pressing banking problem, which is within your power to resolve,” the letter concludes. “Doing so will reap immediate public safety, tax and regulatory benefits while Congress continues to grapple with broader decisions about national drug policy.”
While the associations are right that the legislation is a straightforward policy matter that doesn’t impact the legal status of cannabis under federal law, some lawmakers opposed to reform see it as a first step down that path and are therefore opposed to it.
To that end, Crapo recommended a series of restrictive changes to the bill, including limiting banking access to marijuana businesses that sell products with a maximum of two percent THC. Advocates and industry stakeholders have protested those proposed revisions.
But compromises may be happening behind closed doors, with Sen. Cory Gardner (R-CO) saying last month that lawmakers are “close” to reaching a deal on the legislation and that they are “working through some of the objectives Sen. Crapo has in terms of safety, research and guidance.”
Regardless of what the final product ends up looking like, it’s become clear that the banking issue will have to be dealt with legislatively. The head of the Treasury Department said on Wednesday that it’s a matter beyond his jurisdiction that cannot be handled through administrative action.