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EPA Denies Marijuana Pesticide Applications, But Is Open To Hemp Uses

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The Trump administration has denied requests from states to allow pesticides for use on marijuana, but is open to considering their use on its non-psychoactive cannabis cousin, hemp, according to new documents from the Environmental Protection Agency (EPA).

As noted previously by Bloomberg and others, EPA sent letters in June notifying officials from California, Nevada, Vermont and Washington that the agency planned to disapprove their requests to register pesticides for use on marijuana crops.

But it has not yet been reported that Nevada officials, unlike those from the other three states, did not withdraw their applications after receiving notice from EPA and instead insisted on pursuing the registrations.

“Under federal law, cultivation (along with sale and use) of cannabis is generally unlawful as a schedule I controlled substance under the Controlled Substances Act,” EPA Administrator Scott Pruitt wrote in a July 3 letter formally rejecting the Nevada applications. “The EPA finds that the general illegality of cannabis cultivation makes pesticide use on cannabis a fundamentally different use pattern.”

Under federal law, states can register new uses of pesticides that have been previously federally approved in order to address special local needs (SLNs), as long as the new applications don’t constitute a substantially different use pattern from what has been previously approved.

Pruitt “determined disapproval is reasonable because the EPA does not believe that Congress intended the [special local needs process] to be used for the purpose of facilitating activities that are generally in violation of federal law,” he wrote in the July letter to the Nevada Department of Agriculture. “Any economic, social or environmental costs associated with pesticide use on cannabis would not be reasonable or justified in light of the fact that such use is in furtherance of an illegal act.”

If not for federal marijuana prohibition, the application would’ve been approved.

“The EPA has reviewed the SLN registrations submitted by the state and has not identified any significant risks associated with the SLN registrations,” Pruitt wrote. “The EPA would not have been inclined to disapprove these registrations were cultivation and sale of marijuana generally lawful in the United States.”

Nevada’s insistence of their application, and EPA’s denial of it, were made public in a Federal Register filing last month and, along with the federal agency’s willingness to consider pesticides for use on industrial hemp, were among the subjects of a meeting last week of a key federal advisory panel.

“There has been interest in SLNs for use on industrial hemp,” according to presentation materials for the meeting of EPA’s Pesticide Program Dialogue Committee. The agency’s Office of Pesticide Programs “will consider SLNs for industrial hemp grown under the 2014 Farm Bill provisions.”

Under that legislation, industrial hemp research programs authorized by states are not considered to be in violation of federal laws that generally prohibit cannabis cultivation.

The panel noted concern that “some states have established pesticide residue action levels for cannabis” in light of the fact that “there are no tolerances established for marijuana or hemp” by the federal government and “cannabis does not fit into an existing crop group.”

The meeting documents don’t provide detail on EPA’s process or timeline for considering hemp-related SLNs.

In the meantime, Pruitt told Nevada officials that, when it comes to marijuana, they “must take steps to halt any further sale or distribution of products under these SLN registrations. For uses subject to the disapproval, distribution or sale of existing stocks or all disapproved products listed above is prohibited.”

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Trump Treasury Secretary Wants Marijuana Money In Banks

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The Trump administration’s top fiscal official appeared to voice support for letting marijuana businesses store their profits in banks.

“I assure you that we don’t want bags of cash,” Treasury Secretary Steven Mnuchin testified on Tuesday during an appearance before the House Financial Services Committee. “We want to make sure that we can collect our necessary taxes and other things.”

Mnuchin, in a series of responses to questions from lawmakers who raised concerns about the public safety implications of preventing cannabis businesses from accessing banks and forcing them to operate on an all-cash basis, said the Treasury Department is currently considering how to deal with the issue.

In 2014, under the Obama administration, the department’s Financial Crimes Enforcement Network (FinCEN) issued guidance that has allowed banks to open accounts for marijuana growers, processors and retailers without running afoul of federal regulators.

But last month, U.S. Attorney General Jeff Sessions rescinded a broader policy from the former administration that had generally cleared the way for states to implement their own cannabis laws without Justice Department interference. Sessions’ move has led to fears that the Trump administration may tear up the banking memo as well.

Last week, a top Treasury official wrote in a letter to lawmakers that the department is “consulting with law enforcement” about whether to maintain the guidance for depository institutions. Last month, a Mnuchin deputy testified at a Senate hearing that the banking document remains in effect while the administration weighs whether to revoke it.

At the Tuesday hearing, Mnuchin confirmed that the department is “reviewing the existing guidance.” But he clarified that he doesn’t want to rescind it without having an alternate policy in place to address public safety concerns.

“The intent is not to take it down without a replacement that can deal with the current situation,” he said.

Rep. Brad Sherman (D-CA) told Mnuchin that simply deleting the banking memo “would really make it better for armed robbers in my community, because there’d be huge amounts of cash at the local marijuana dispensary.”

Reps. Denny Heck (D-WA) and Ed Perlmutter (D-CO) also raised questions about the issue.

“We specifically haven’t taken it down,” Mnuchin said of the 2014 memo. “We are looking at what Justice has done. And again, as I said, we’re sensitive to the issue of dealing with the public safety issue and also making sure that the IRS and others have ways of collecting taxes without taking in cash.”

In response to comments about pending congressional legislation to address cannabis businesses’ access to financial services, Mnuchin pledged to consult with White House Office of Management and Budget Director Mick Mulvaney, who as a member of Congress previously sponsored a similar bill.

Perlmutter’s legislation on the issue currently has 78 co-sponsors, and a companion Senate version has 14 senators signed on. Bipartisan groups of House and Senate lawmakers have also sent letters to the administration urging that the banking guidance be maintained.

During the hearing, Mnuchin also appeared to confirm a Reuters report that FinCEN was not consulted in advance about Sessions’s decision to change federal marijuana enforcement policy.

“I did not participate in the attorney general’s decision and what he did, but we are consulting with them now,” he said. “We do want to find a solution to make sure that businesses that have large access to cash have a way to get them into a depository institution for it to be safe.”

The FinCEN policy, which requires financial institutions to regularly file reports on their cannabis customers, was intended to provide clarity and assurances to banks, but many have remained reluctant to work with marijuana businesses because of overarching federal prohibition.

Nonetheless, documents released by FinCEN late last year showed that the number of banks willing to work with the marijuana industry has steadily grown over time, though those figures were collected prior to Sessions’s move to revoke the broader Justice Department guidance.

Prior to his being confirmed by the Senate last year , Mnuchin said in response to written questions from a senator that marijuana businesses’ banking and tax issues are “very important.”

This piece was first published by Forbes.

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Feds May Remove Marijuana Banking Protections, Treasury Department Says

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The Trump administration is currently considering removing Obama-era guidance that has allowed banks to open accounts for marijuana businesses without fear of running afoul of federal regulators.

Last month, U.S. Attorney General Jeff Sessions rescinded a broader policy from the former administration that has generally cleared the way for states to implement their own cannabis laws without Justice Department interference.

Now, the federal government may move to make it harder for cannabis industry operators who comply with state laws to store their profits with financial institutions.

“We are reviewing the [banking] guidance in light of the Attorney General’s announcement and are consulting with law enforcement,” Drew Maloney, the U.S. Treasury Department’s assistant secretary for legislative affairs, wrote in a letter to members of Congress on Wednesday.

The letter is a response to a bipartisan group of 31 House members that had written the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) last month asking the agency to continue the cannabis banking guidance. Fifteen senators separately sent a similar letter.

The FinCEN document, issued in 2014, laid out a process for how banks can open accounts for marijuana businesses and avoid triggering federal enforcement actions.

“FinCEN’s stated priorities have allowed such businesses to conduct commerce more safely through financial institutions which reduces the use of all cash, improves public safety, and reduces fraud,” the House lawmakers wrote in their letter. “Leaving your guidance unchanged will continue to encourage small companies to make investments by freeing up access to capital. It will also further provide for well regulation and oversight through suspicious activity reports. Rescinding this guidance would inject uncertainty in the financial markets.”

Last month, Sigal Mandelker, the Treasury Department’s deputy secretary, testified at a Senate hearing that the banking memo is still in effect while the Trump administration weighs whether to revoke it.

Similarly, Maloney wrote on Wednesday that guidance “remains in place” for now, pledging to alert lawmakers to any changes.

The FinCEN policy, which requires financial institutions to regularly file reports on their cannabis customers, was intended to provide clarity and assurances to banks, but many have remained reluctant to work with marijuana businesses because of overarching federal prohibition laws.

Nonetheless, documents released by FinCEN late last year showed that the number of banks willing to work with the marijuana industry has steadily grown over time, though those figures were collected prior to Sessions’s move to revoke the broader Justice Department guidance.

This piece was first published by Forbes.

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More Banks Welcome Marijuana Businesses, Federal Data Shows

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A steadily growing number of banks are willing to open accounts for marijuana businesses, according to new federal data.

Even as a string of conflicting signals from the Trump administration surrounds the debate about legalization with uncertainty, the number of depository institutions that are actively banking the cannabis industry has increased roughly 18% since the beginning of 2017.

Last January, 340 financial services providers were banking marijuana businesses. That number rose to 400 by the end of September, according to a report released late last month by the Financial Crimes Enforcement Network (FinCEN).

The rise comes despite continued confusion about the federal government’s approach to marijuana as U.S. Attorney General Jeff Sessions — a longtime legalization opponent — has made clear he is considering potential changes to the former administration’s mostly hands-off cannabis enforcement policies.

In 2014, the Obama administration’s Treasury and Justice Departments issued guidance to banks about how to serve the marijuana industry without running afoul of federal regulators. The policy, which requires financial institutions to regularly file reports on their cannabis customers, was intended to provide clarity and assurances to banks. But many have remained reluctant to work with marijuana businesses because of overarching federal prohibition laws.

Under a separate document — the so-called “Cole Memo,” named after the then-deputy attorney general who authored it in 2013 — the federal government set out certain criteria that, if followed, would allow states to implement their own laws mostly without intervention. Those areas concern priorities like preventing youth use, impaired driving and interstate trafficking.

While Sessions testified before Congress in November that the Obama-era guidance is still in effect, he later said that the Department of Justice is actively reviewing potential changes to the policy. He also held a closed-door meeting with anti-legalization activists last month.

Those developments are just the latest in a series of anti-cannabis signals sent by the attorney general over the course of the past year. Meanwhile, a number of anecdotal reports have emerged in recent months about individual cannabis business bank accounts being closed.

Umpqua Bank, for example, reportedly shut down the account of Greenbridge Corporate Counsel this fall after the law firm refused to turn over information about its cannabis clients without their permission.

But the new federal data shows that overall there has been a steady increase in the number of banks and credit unions willing to open accounts for marijuana-related businesses, even as Sessions has hinted that a cannabis crackdown could be in the works.

The new FinCEN report is part of a set of periodic releases in response to frequently requested data under the Freedom of Information Act.

Because of banks’ reluctance to work with marijuana businesses, many growers, processors and retailers operate on a cash-only basis, which can make them targets for robberies.

A growing bipartisan group of members of Congress has sought a legislative solution to the problem. House and Senate bills to provide permanent clarity to the banking industry about working with marijuana businesses have earned increasing cosponsor numbers, but haven’t been scheduled for hearings or votes.

In 2014, the House voted 231 to 192 in favor of an amendment to prevent federal authorities from punishing banks for servicing the legal marijuana industry. But the language was not included in the final version of annual appropriations legislation that year and was not enacted into law. Congressional Republican leaders have since prevented similar measures from even being considered for attachment to subsequent spending bills.

In November, the chair of the House Financial Services Committee used a procedural ruling to block a vote on a cannabis banking amendment offered to a bill on stress testing for financial institutions.

Meanwhile, a congressional budget rider that prevents the Justice Department from interfering with state medical cannabis laws is set to expire on January 19, barring an extension through a still-unresolved Fiscal Year 2018 spending package.

Legalization advocates believe that several more states will enact laws allowing recreational or medical use in 2018.

This piece was first published by Forbes.

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