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Diversity Provisions Added To Marijuana Banking Bill Up For Congressional Vote This Week

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The sponsor of a marijuana banking bill scheduled for a key committee vote in Congress this week is moving to amend the legislation to add provisions requiring the federal government to track and issue recommendations on how to expand financial services to minority-owned and women-owned cannabis businesses, among other changes.

The bill, the the Secure And Fair Enforcement (SAFE) Banking Act, is slated to be voted on by the House Financial Services Committee on Tuesday afternoon.

In general the proposal seeks to protect banks from bring punished by federal regulators for working with marijuana businesses that are legal under state laws—a key goal for the cannabis industry, the lack of which is seen as a major roadblock to certainty, security and growth.

Current policy makes many financial institutions reluctant to work with marijuana growers, processors or sellers out of fear of violating money laundering or drug laws. And that has forced many cannabis businesses to operate on a cash-only basis, which can make them targets for robberies.

The new House Democratic majority has identified moving on the banking issue as the first step in what could be a broad marijuana reform agenda, although top Republicans are seeking to delay the vote from happening at all this week.

Meanwhile, Rep. Ed Perlmutter (D-CO), the bill’s chief sponsor, wants to strike the current bill’s provisions and replace them with a new version—an “amendment in the nature of a substitute,” in Capitol Hill parlance.

Many of its core provisions, and the main thrust of the legislation, which currently has 143 cosponsors—nearly a third of the entire House—remain the same, however.

Chief among the changes are the diversity and inclusion provisions that would require federal financial regulators to issue reports on an annual basis compiling “information and data on the availability of access to financial services for minority-owned and women-owned cannabis-related legitimate businesses” and make “regulatory or legislative recommendations for expanding access to financial services” for those businesses

Separately, the Government Accountability Office would be directed to “carry out a study on the barriers to marketplace entry, including in the licensing process, and the access to financial services for potential and existing minority-owned and women-owned cannabis-related legitimate businesses.”

Another change would spell out more clearly which activities are covered under the legislation’s protections. The original version referred to the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act to define “financial service.”

The amended language, however,  specifies that the protections provided in the bill cover armored car services and money transmitting businesses, as well as the “authorizing, processing, clearing, settling, billing, transferring for deposit, transmitting, delivering, instructing to be delivered, reconciling, collecting, or otherwise effectuating or facilitating of payments or funds, where such payments or funds are made or transferred by any means, including by the use of credit cards, debit cards, other payment cards, or other access devices, accounts, original or substitute checks, or electronic funds transfers.”

The substitute additionally makes sure to clarify that protections under the legislation are extended to federal reserve banks and employees of marijuana businesses.

The amendment also deletes a requirement for federal banking regulators to issue guidance and procedures to banks but maintains a related provision directing the Financial Institutions Examination Council to develop the guidance.

“With access to banking services, cannabis businesses would longer need to operate as a cash only business, which could promote public safety and improve the efficiency of collecting taxes and fees from these businesses,” reads a new committee memo on the bill released ahead of Tuesday’s markup.

The legislation was the subject of a lengthy hearing last month.

Here’s a closer look at the changes Marijuana Moment spotted in a side-by-side comparison of the original bill and the substitute amendment, with technical and non-substantive changes listed last:

OLD:
[no comparable provision]
NEW:
SEC. 8. ANNUAL DIVERSITY AND INCLUSION REPORT.
The Federal banking regulators shall issue an annual report to Congress containing—
(1) information and data on the availability of access to financial services for minority-owned and women-owned cannabis-related legitimate businesses; and
(2) any regulatory or legislative recommendations for expanding access to financial services for minority-owned and women-owned cannabis-related legitimate businesses.

 

OLD:
[no comparable provision]
NEW:
SEC. 9. GAO STUDY ON DIVERSITY AND INCLUSION.
(a) STUDY.—The Comptroller General of the United States shall carry out a study on the barriers to marketplace entry, including in the licensing process, and the access to financial services for potential and existing minority-owned and women-owned cannabis-related legitimate businesses.
(b) REPORT.—The Comptroller General shall issue a report to the Congress—
(1) containing all findings and determinations made in carrying out the study required under subsection (a); and
(2) containing any regulatory or legislative recommendations for removing barriers to marketplace entry, including in the licensing process, and expanding access to financial services for potential and existing minority-owned and women-owned cannabis-related legitimate businesses.

 

OLD:
(6) FINANCIAL SERVICE.—The term ‘‘financial service’’ means a financial product or service as defined in section 1002 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5481).
NEW:
(6) FINANCIAL SERVICE.—The term ‘‘financial service’’—
(A) means a financial product or service, as defined in section 1002 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5481);
(B) includes, whether performed directly or indirectly, the authorizing, processing, clearing, settling, billing, transferring for deposit, transmitting, delivering, instructing to be delivered, reconciling, collecting, or otherwise effectuating or facilitating of payments or funds, where such payments or funds are made or transferred by any means, including by the use of credit cards, debit cards, other payment cards, or other access devices, accounts, original or substitute checks, or electronic funds transfers;
(C) includes acting as a money transmitting business which directly or indirectly makes use of a depository institution in connection with effectuating or facilitating a payment for a cannabis-related legitimate business or service provider in compliance with section 5330 of title 31, United States Code, and any applicable State law; and
(D) includes acting as an armored car service for deposit with a depository institution or the Board of Governors of the Federal Reserve System with respect to any monetary instruments (as defined under section 1956(c)(5) of title 18, United States Code.

 

OLD:
[no comparable provision]
NEW:
(b) PROTECTIONS FOR FEDERAL RESERVE BANKS.—With respect to providing a service to a depository institution that provides a financial service to a cannabis-related legitimate business or service provider (where such financial service is provided within a State, political subdivision of a State, or Indian country that allows the cultivation, production, manufacture, sale, transportation, display, dispensing, distribution, or purchase of cannabis pursuant to a law or regulation of such State, political subdivision, or Indian Tribe that has jurisdiction over the Indian country, as applicable), a Federal reserve bank, and the officers, directors, and employees of the Federal reserve bank, may not be held liable pursuant to any Federal law or regulation—
(1) solely for providing such a service; or
(2) for further investing any income derived from such a service.

 

OLD:
(b)FORFEITURE.—A depository institution that has a legal interest in the collateral for a loan or another financial service provided to an owner or operator of a cannabis-related legitimate business or service provider, or to an owner or operator of real estate or equipment that is leased or sold to a cannabis-related legitimate business or service provider, shall not be subject to criminal, civil, or administrative forfeiture of that legal interest pursuant to any Federal law for providing such loan or other financial service.
NEW:
(c) FORFEITURE.—
(1) DEPOSITORY INSTITUTIONS.—A depository institution that has a legal interest in the collateral for a loan or another financial service provided to an owner, employee, or operator of a cannabis-related legitimate business or service provider, or to an owner or operator of real estate or equipment that is leased or sold to a cannabis-related legitimate business or service provider, shall not be subject to criminal, civil, or administrative forfeiture of that legal interest pursuant to any Federal law for providing such loan or other financial service.
(2) FEDERAL RESERVE BANKS.—A Federal reserve bank that has a legal interest in the collateral for a loan or another financial service provided to an owner, employee, or operator of a depository institution that provides a financial services to a cannabis-related legitimate business or service provider, or to
an owner or operator of real estate or equipment that is leased or sold to such a depository institution, shall not be subject to criminal, civil, or administrative forfeiture of that legal interest pursuant to any Federal law for providing such loan or other financial service.

 

OLD:
ISSUANCE BY FEDERAL BANKING REGULATORS.—The Federal banking regulators shall each issue guidance and examination procedures for depository institutions that provide financial services to cannabis-related legitimate businesses and service providers that are consistent with the uniform guidance and examination procedures developed under subsection (a).
NEW:
[no comparable provision]

 

OLD:
(5) FEDERAL BANKING REGULATOR.—The term ‘‘Federal banking regulator’’ means each of the Board of Governors of the Federal Reserve System, the Bureau of Consumer Financial Protection, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration, or any Federal agency or department that regulates banking or financial services, as determined by the Secretary of the Treasury.
NEW:
(5) FEDERAL BANKING REGULATOR.—The term ‘‘Federal banking regulator’’ means each of the Board of Governors of the Federal Reserve System, the Bureau of Consumer Financial Protection, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network, the Office of Foreign Asset Control, the Office of the Comptroller of the Currency, the National Credit Union Administration, the Department of the Treasury, or any Federal agency or department that regulates banking or financial services, as determined by the Secretary of the Treasury.

 

OLD:
(5) prohibit or penalize a depository institution, or entity performing services for the depository institution, for, or otherwise discourage a depository institution, or entity performing services for the depository institution, from, authorizing, processing, clearing, settling, billing, transferring, reconciling, or collecting payments for a cannabis-related legitimate business, where such payment is made by any means, including a credit, debit, or other payment card, an account, check, or electronic funds transfer
NEW:
(5) prohibit or penalize a depository institution (or entity performing a financial service for or in association with a depository institution) for, or otherwise discourage a depository institution (or entity performing a financial service for or in association with a depository institution) from, engaging in a financial service for a cannabis-related legitimate business or service provider.

 

OLD:
(a) IN GENERAL.—With respect to providing financial services within a State, political subdivision of a State, or Indian country that allows the cultivation, production, manufacture, sale, transportation, display, dispensing, distribution, or purchase of cannabis pursuant to a law or regulation of such State, political subdivision, or Indian Tribe that has jurisdiction over the Indian country, as applicable, a depository institution that provides financial services to a cannabis-related legitimate business or service provider, and the officers, directors, and employees of that depository institution may not be held liable pursuant to any Federal law or regulation—
(1) solely for providing such financial services;
(2) for further investing any income derived from such financial services.
NEW:
(a) IN GENERAL.—With respect to providing a financial service to a cannabis-related legitimate business or service provider within a State, political subdivision of a State, or Indian country that allows the cultivation, production, manufacture, sale, transportation, display, dispensing, distribution, or purchase of cannabis pursuant to a law or regulation of such State, political subdivision, or Indian Tribe that has jurisdiction over the Indian country, as applicable, a depository institution, entity performing a financial service for or in association with a depository institution, or Federal reserve bank that provides a financial service to a cannabis-related legitimate business or service provider, and the officers, directors, and employees of that depository institution, entity, or Federal reserve bank may not be held liable pursuant to any Federal law or regulation—
(1) solely for providing such a financial service;
(2) for further investing any income derived from such a financial service.

 

OLD:
Nothing in this Act shall require a depository institution to provide financial services to a cannabis-related legitimate business or service provider.
NEW:
Nothing in this Act shall require a depository institution or entity performing a financial service for or in association with a depository institution to provide financial services to a cannabis-related legitimate business or service provider.

 

OLD:
The purpose of this Act is to increase public safety by expanding financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such businesses.
NEW:
The purpose of this Act is to increase public safety by ensuring access to financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such businesses.

 

OLD:
FINANCIAL SERVICE.—The term ‘financial service’ means a financial product or service as defined in section 1002 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5481).
NEW:
FINANCIAL SERVICE.—The term ‘financial service’ has the meaning given that term in section 10 of the SAFE Banking Act of 2019.

 

OLD:
CANNABIS-RELATED LEGITIMATE BUSINESS.—The term ‘cannabis-related legitimate business’ has the meaning given that term in section 8 of the SAFE Banking Act of 2019.
NEW:
CANNABIS-RELATED LEGITIMATE BUSINESS.—The term ‘cannabis-related legitimate business’ has the meaning given that term in section 10 of the SAFE Banking Act of 2019.

 

OLD:
SERVICE PROVIDER.—The term ‘service provider’ has the meaning given that term in section 8 of the SAFE Banking Act of 2019.
NEW:
SERVICE PROVIDER.—The term ‘service provider’ has the meaning given that term in section 10 of the SAFE Banking Act of 2019.

 

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Tom Angell is the editor of Marijuana Moment. A 15-year veteran in the cannabis law reform movement, he covers the policy and politics of marijuana. Separately, he founded the nonprofit Marijuana Majority. Previously he reported for Marijuana.com and MassRoots, and handled media relations and campaigns for Law Enforcement Against Prohibition and Students for Sensible Drug Policy. (Organization citations are for identification only and do not constitute an endorsement or partnership.)

Politics

Marijuana Banking Bill Would Save Federal Money, Congressional Budget Office Says

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The federal government would save money if a bipartisan bill to give marijuana businesses access to banks is approved, according to a report released by the Congressional Budget Office (CBO) on Friday.

The legislation, which cleared the House Financial Services Committee in a bipartisan vote of 45 to 15 in March, would change federal law to protect financial institutions that service the cannabis industry from being penalized by regulators. That reform would set off a chain of events, beginning with a likely increase in the number of banks accepting deposits from those businesses, CBO reasoned.

Assuming the bill takes effect near the end of the 2019 fiscal year, the office estimates that starting in 2022, banks would see a $1.2 billion increase in deposits, and credit union deposits would grow by $200 million. By 2029, the amounts “would rise to $2.1 billion and $350 million, respectively.”

Because those deposits would have to be insured through the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA), the CBO took into account the possibility that individual financial institutions will fail, and the estimated cost of resolving those failures is $5 million.

That said, those direct spending costs would be “offset by assessments levied on insured financial institutions,” which would amount to about $9 million.

“As a result, CBO estimates, H.R. 1595 would decrease net direct spending by $4 million over the 2019-2029 period,” the office reported.

Rep. Ed Perlmutter (D-CO), the bill’s chief sponsor, told Marijuana Moment that its enactment would have benefits beyond fiscal savings.

“Getting cash off our streets and making our communities safer will come at no cost to the federal government and actually save money while providing a much-needed long-term banking solution for legitimate marijuana businesses across the country,” he said.

Via CBO.

“This CBO score should only increase the significant momentum in Congress behind passing the SAFE Banking Act,” Neal Levine, CEO of the Cannabis Trade Federation, told Marijuana Moment. “It is now apparent that we can help diminish a serious threat to public safety at no net cost to the federal government. We look forward to the bill passing through the House and hope the Senate will follow suit.”

There are some implementation costs to take into account, CBO says. The administrative costs are estimated to be $3 million. But the FDIC and NCUA are able to charge premiums on the financial institutions they regulate to cover much of those costs. The total net administrative costs would, therefore, be about $1 million.

The Federal Reserve would also have to spend funds to implement the bill, and that would reduce remittances to the Treasury Department. Those remittances are considered revenue, which is expected to decrease by about $1 million if the legislation is implemented.

Then there are costs related to other provisions of the bill. Financial regulators would have to update and issue new guidance, which would “cost less than $500,000 over the 2019-2024 period.”

The legislation also requires the Government Accountability Office to study barriers to entry in the marijuana industry and to financial services for minority- and women-owned cannabis businesses. The costs are estimated to be less than $500,000 annually from 2020 to 2024.

The CBO also estimated that enacting the legislation “would not increase on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2030.”

The CBO outlined “several noteworthy areas of uncertainty” that could change the calculus.

1. New guidance from federal financial regulators could be more or less stringent than existing guidance implemented under the Obama administration, which could impact the amount of deposits banks and credit unions will receive.

2. Data on cannabis-related deposits is currently “limited,” as federal restrictions have forced marijuana businesses to operate on a largely cash basis. That means CBO’s estimates on the amount of deposits financial institutions will see could end up being “greater or smaller.”

3. If those estimates do end up being different, costs associated with the bank and credit union insurance funds “could be higher or lower depending on the amount of premium collections and capital deposits and on changes in the resolution costs for financial institutions.”

Sahar Ayinehsazian, an associate attorney at Vicente Sederberg LLP who specializes in cannabis banking, told Marijuana Moment that most of the figures lined up with her expectations. However, given that many marijuana businesses have gravitated toward credit unions rather than banks, she said the estimate increase in deposits to those financial institutions may well end up being larger.

“Looking at the chances of this legislation passing from an economic standpoint, I think [the CBO score is] good news,” she said.

Other advocates agreed that the CBO estimate should help efforts to advance the bill.

“For years, cannabis advocates have been preaching the net benefits SAFE Banking would have on consumers, patients, financial institutions, regulators and taxpayers. This CBO cost estimate confirms that,” Michael Correia, director of government relations for the National Cannabis Industry Association, told Marijuana Moment. “The increase of insured deposits, coming from the added certainty this legislation brings, far outweighs the minor administrative costs to implement this bill.”

The House marijuana banking bill currently has 184 cosponsors, and a companion Senate version has 30 lawmakers signed on. The committee of jurisdiction in the upper chamber has not yet set a hearing or a vote, but pressure is increasing.

Banking associations from all 50 states urged the Senate to take up the legislation earlier this week. Other organizations that have called for a resolution to the cannabis banking dilemma include the National Association of Attorneys General, which has endorsed the bill, and the National Association of State Treasurers, representing state treasurers and finance officials, which adopted a resolution last week in favor of the legislation’s passage.

The new analysis is just the third time that the CBO, which is mandated to score bills that pass full committees, has issued a report on the economic impact of standalone cannabis legislation. The agency scored two marijuana research bills that cleared committees last year.

Federal Small Business Administration Pressed On Supporting Marijuana Industry

This story was updated to include comment from Perlmutter and Correia.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
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Federal Small Business Administration Pressed On Supporting Marijuana Industry

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Sen. Jacky Rosen (D-NV) pressed a federal official responsible for advocating for small businesses on Wednesday about whether existing laws and regulations are preventing the growth of state-legal marijuana markets.

The line of questioning comes as members of Congress are preparing legislation aimed at removing barriers to small business assistance for cannabis industry participants.

The senator said at a hearing of the Senate Small Business and Entrepreneurship Committee that her state’s legal industry is attracting small businesses and entrepreneurs who are selling millions of dollars of product each month. She asked Major Clark, acting chief counsel of the office of advocacy at the Small Business Administration (SBA), about the unique barriers these companies face under federal prohibition.

“Senator, that’s a difficult question,” Clark replied. “We have not actually studied the issue of marijuana in that regard, and we have not because the federal government has not yet legalized it.”

“We do, in conversations with a lot of businesses, get inquires as to what they can do and how they can do it. But to actually do an analysis of it, we have not yet done that,” he said. “I’m sure that as soon as the federal government decides to legalize this substance, we will begin to study its impact and the ability to use it in a more economical context within the state.”

Watch the conversation about small business assistance for cannabis operators at 35:50 in the video below:

Rosen followed up to get Clark’s opinion about whether marijuana companies would benefit from some of the guidelines and resources the SBA offers to small businesses in other industries.

“These types of businesses can benefit from some of these types of things, but again, because this issue is an issue that has not reached the surface of being legalized, we have actually stayed away from trying to advise these businesses on these particular aspects,” he said.

Sen. James Lankford (R-OK), chair of the committee, weighed in on the issue after the Rosen’s time expired, saying that he recognizes the difficulty that federal agencies face when it comes to regulating a controlled substance.

“It is a unique challenge dealing with a Schedule I drug on the federal side and to also know that some states, including my own, have said that they want to allow it,” Lankford said, referring to the medical cannabis law that Oklahoma voters approved in 2018. “And the federal government and the [Food and Drug Administration] continues to study it and say there’s no medicinal gain from this product.”

“It’s a Schedule I drug. I get it,” he said. “The science, and whether it is SBA or whoever it is continues to be able to deal with that.”

While lawmakers push to get marijuana businesses access to federally authorized financial services, industry advocates say that SBA-specific reform legislation may be on the horizon.

The day after Rosen questioned the SBA official about cannabis policy, Khurshid Khoja, a board member for the National Cannabis Industry Association, said at a press conference on Capitol Hill that a bill was being drafted to “essentially get SBA services for cannabis businesses and for cannabis businesses from disproportionately impacted communities.”

Watch the SBA reform discussion at about 32:15 in the video below:

“The House Small Business Committee is looking into the issue and is interested in holding a hearing and drafting legislation this summer that addresses these issues,” a cannabis policy lobbyist who didn’t wish to be named in order to discuss plans that are in development, told Marijuana Moment separately.

GOP Congressman Exposes Flaws In VA Marijuana Research Projects

Photo courtesy of Brian Shamblen.

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GOP Congressman Exposes Flaws In VA Marijuana Research Projects

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Rep. Matt Gaetz (R-FL) emphasized the importance conducting clinical trials on medical marijuana at the U.S. Department of Veterans Affairs (VA) on Tuesday, a topic on which he has often focused.

He also criticized the catch-22 of VA cannabis research, arguing that while the department is able to conduct clinical trials on marijuana, it doesn’t effectively publicize those studies, leaving veterans who might be interested in participating in the dark.

The congressman started by asking whether Mike Colston, director of mental health policy and oversight at the Department of Defense, felt that giving veterans access to medical cannabis could reduce suicides.

Colston said “there’s far more research to be done” and that there’s “insufficient evidence for or against that position.”

Gaetz cited research showing reductions in opioid use in states that have loosened cannabis laws, and he questioned whether “the current offramp for opioid addiction,” which typically involves prescribing long-term opioids that are less potent and less prone to abuse, “is a more effective offramp than medical cannabis.”

“I just think those are the three evidence-based therapies right now that meet the medical bar,” Colston said, referring to bupenehprine, methadone and naltrexone. “Obviously more research can change that.”

That prompted Gaetz to expand on VA policy as it pertains to medical cannabis. He asked for confirmation that the department’s doctors cannot currently recommend marijuana to veterans in states where it’s legal.

They can’t do that because “there’s a federal law against it right now,” Keita Franklin, national director of suicide prevention at the VA, claimed. (This has been a point of contention for legalization advocates, who argue that only the VA’s own internal administrative policies, and not an overarching federal law, blocks such recommendations.)

But VA officials can conduct clinical trials on marijuana, Franklin said.

“We have two ongoing research studies going on right now in this space,” she said. “I think we are open to research, yes.”

The congressman wanted to know if the VA publishes information about these studies and where to find it. The VA official wasn’t sure—and that was exactly Gaetz’s point.

“I don’t think anyone is clear, which is the source of my frustration because I think that there are a lot of these clinical trials that are seeking veterans,” he said. “The VA, due to a lack of clarity, won’t publicize that information or make it available, and then we’re unable to do the research that Captain Colston says is necessary to advance additional options for veterans trying to get off opioids and to stop them from killing themselves.”

Lawmakers have introduced legislation this session that would allow VA doctors to issue medical cannabis recommendations and require the department to conduct clinical trials on the plant’s potential therapeutic benefits for veterans, among other cannabis and veterans-related bills.

But if the VA is mandated to research the plant, Gaetz wants the department to better publicize the studies so that would-be participants actually know about them.

Trump Official Would Rather Discuss Marijuana Than President’s Tax Returns, He Says

Photo courtesy of YouTube.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
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