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Federal Reserve Bank Presidents Call For Marijuana Banking Clarity

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Three Federal Reserve Bank presidents united in a call on Wednesday for clarity on rules for providing financial services to the marijuana industry.

During a panel at the American Bankers Association summit, the federal executives were asked about how financial institutions are expected to manage conflicting state and federal cannabis laws. All three stressed the need for a resolution to how the growing gap between state and federal marijuana laws has created difficulties for bankers and cannabis businesses alike.

“For better or for worse, we’re responsible to follow federal law, and so we would very much like to have clarification on this,” Tom Barkin, CEO of the Federal Reserve Bank of Richmond, said. “Whatever legislative answer gets us to clarity would be our preferred outcome.”

Esther George, who runs the Federal Reserve Bank of Kansas City, added that “the reality on the ground is there are businesses that are considered state-legal around this substance, and the money that is generated from that again, is a challenge for the banks.”

Choosing to service a marijuana business is “not an easy judgement for the banks to make,” she said. “They deem what’s the level of risk—how do I apprise for that, how do I manage that? I think that it is particularly challenging for them, so I look forward to that resolution that provides more clarity to the bankers.”

What advice would George offer financial institutions interested in accepting cannabis business accounts?

“Do your homework,” she said. “This is a case where you have to know your customer and you have to weigh the risk of what you’re worried about could happen around this.”

“We have to get reconciliation across federal and state law ultimately to make this work. In the meantime, you’re going to have some of these challenging situations.”

Raphael Bostic, CEO of the Federal Reserve Bank of Atlanta, put the situation into starker terms. Existing federal cannabis laws put banks “in an impossible situation because we don’t actually have a vote at either level but are asked to sort of navigate in this middle space,” he said.

“There’s not really a clear thing for us to say—we can’t give anyone 100 percent certainty in terms of how this is going to turn out,” he said. “I do hope that we get some legislative clarity sooner rather than later. I would love some resolution, one way or the other, as soon as we possibly can because this is only become more prominent.”

Watch video of the Federal Reserve Bank officials discussing marijuana, around 49:00 into the video below:

The branch presidents echoed what other top federal financial officials have said in recent months. Treasury Secretary Steven Mnuchin told senators that “this issue needs to be resolved one way or another because there are conflicts in so many regulations and rules and everything else” during a hearing last month.

Another Treasury official similarly told lawmakers that “this is really something I think that Congress needs to look at because nothing that we do can or does change what is prohibited under federal law.”

A resolution might be on the horizon after the House Financial Services Committee approved legislation that would shield banks that service cannabis businesses from being penalized by financial regulators. That bill is now awaiting scheduling for a full House floor vote.

U.S. Senators Push Federal Bank Regulators To Clarify Rules For Hemp Businesses

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.

Kyle Jaeger is Marijuana Moment's Los Angeles-based associate editor. His work has also appeared in High Times, VICE and attn.

Politics

Scientists Sue DEA Over Alleged ‘Secret’ Document That Delayed Marijuana Research Expansion

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The Drug Enforcement Administration (DEA) is finding itself in court over marijuana again after scientists filed a lawsuit against the agency, requesting “secret” documents that they allege DEA used to delay action on expanding cannabis research.

The Scottsdale Research Institute (SRI) is behind the suit. It’s one of more than 30 organizations that have submitted applications to DEA to become licensed cannabis manufacturers for research purposes.

Some background should be noted: In 2016, DEA announced it would expand marijuana research by approving additional growers beyond the sole source that has existed for half a century at the University of Mississippi. But after more than three years, applicants heard silence, and SRI filed an initial lawsuit alleging that the agency was deliberately holding up the process. A court mandated that it take steps to make good on its promise, and that case was dropped after DEA provided a status update.

This month, DEA finally unveiled a revised rule change proposal that it said was necessary due to the high volume of applicants and to address potential complications related to international treaties to which the U.S. is a party. A public comment period is now open, after which point the agency says it will finally approve an unspecified number of additional growers.

But what really accounted for the delay?

According to the plaintiffs in this new suit, after DEA said it would accept more cultivators, the Justice Department’s Office of Legal Counsel (OLC) secretly issued an opinion that interprets international treaty obligations as making it impossible to carry out the 2016 proposed rule while maintaining compliance.

The new revised rule aims to address the problem, in part by shifting jurisdiction over the cannabis to a single agency, DEA, which would purchase and technically own all of the cannabis grown by approved cultivators, and would then later sell the product directly to researchers.

That OLC document, which is not public, is the basis of SRI’s Freedom of Information Act (FOIA) complaint. The case was filed with the U.S. District Court for the District of Arizona on Wednesday and requests that the Justice Department be found guilty of unlawfully failing to make records available related to its interpretation of the Single Convention treaty, including the OLC opinion. It further states that DEA should release those documents and pay the plaintiff’s attorney fees.

Matt Zorn, an attorney working the case, told Marijuana Moment in a phone interview that it’s not clear what’s contained in the OLC opinion and that the uncertainty is “entirely the point” of the suit.

“I think we all know vaguely what it says—the subject matter of it—but we don’t know what it actually says,” he said. “That’s important because you need to know what that instruction was or what their interpretation of the law is to assess whether what they’re doing now is appropriate.”

The suit claims that SRI, “as a non-commercial company dedicated to advancing the state of medical care through clinical research, is directly harmed by this unlawful secrecy.”

“Because Defendants have failed to fully disclose their re-interpretation of federal law and treaty obligations as the law requires, Plaintiff lacks information necessary to protect its legal rights, including the right to have its application to manufacture marijuana for research processed in compliance with the Administrative Procedure Act and the [Controlled Substances Act],” the filing states.

SRI’s research objective for cannabis is to determine potential therapeutic benefits for veterans suffering from conditions such as post-traumatic stress disorder. “While DEA’s unlawful and dilatory conduct harms the public generally, the secrecy and delay have been especially harmful to our nations’ veterans,” the suit says.

“We deserve not only to know the scientific truth about medical marijuana use, but candor from our government, which includes disclosure of the ‘secret law’ the agency continues to rely on as a basis to delay and ultimately revamp the process for researching and manufacturing marijuana in this country,” the filing says. “Plaintiff brings this FOIA action so can understand the legal basis—if there is one—for the government’s conduct surrounding the Growers Program.”

While SRI acknowledged that DEA last week announced its revised rule change proposal, the suit states that the explanation about how it arrived at its determination “leaves Plaintiff and the public in the dark with respect to several critical considerations.” For example, it alleges, the notice doesn’t account for how the Justice Department advised the agency on the matter and which parts of the amended proposal would make the action compliant with international treaties.

“The answer to these questions and others presumably lies in the undisclosed OLC Opinion and related records that animated DOJ’s decision to sideline the Growers Program and prompted DEA to embark on this notice-and-comment rulemaking in the first place… In sum, using a secret OLC Opinion interpreting the CSA and a 1961 international treaty, DEA delayed processing applications to cultivate marijuana for research and now proposes to radically revamp federal law through rulemaking—rules which will loom large over the future of medical marijuana research, manufacture, and distribution going forward.”

The plaintiffs argue that DEA violated federal statute that prohibits the creation of a “secret law.” The statute says that federal agencies must make records—including final opinions and policy interpretations not published in the Federal Register—public.

“To block the Growers Program, DOJ formulated—through the OLC Opinion and related records—and DEA adopted to an undisclosed interpretation of the Single Convention and federal law contrary to the view espoused and published by DEA in the August 2016 Policy Statement, and contrary to the view of the State Department,” it continues, apparently referencing a letter the State Department sent to a senator in response to questions about the role of international treaties as it concerns expanding cannabis cultivation facilities.

In that letter, the department said nothing about the Single Convention prevents member nations from increasing the number of such facilities. “If a party to the Single Convention issued multiple licenses for the cultivation of cannabis for medical and scientific purposes, that fact alone would not be a sufficient basis to conclude that the party was acting in contravention of the Convention,” it read.

Read the State Department’s responses on international treaties and marijuana below:

State Dept Response on Single Convention by Marijuana Moment on Scribd

If the new lawsuit’s allegations prove accurate, it could help explain the role of former Attorney General Jeff Sessions, the anti-marijuana official who was reportedly involved in blocking research expansion.

The suit, which was first reported by Politico, goes on to say:

“For more than three years, Defendants relied on this undisclosed interpretation, contained in the OLC Opinion and related records, to make an end-run around the Administrative Procedure Act by unlawfully withholding and unreasonably delaying agency action on marijuana cultivation applications. The OLC Opinion has guided DEA’s actions—and its inaction… The government’s unlawful conduct under FOIA prevents Plaintiff and those similarly situated from timely and effectively vindicating legal rights under the Administrative Procedure Act, effectively rendering its protections and judicial review provisions meaningless.”

To resolve the issue, SRI said it wants DEA to be held accountable for violating federal law, release the documents and compensate them for the legal action. While this is a FOIA-related suit, the institute didn’t first seek the documents through a standard document request but instead filed the case under the law’s “Reading Room provision” that allows courts to force federal agencies to put records online, according to a Ninth Circuit ruling last year.

Sue Sisley, a researcher with SRI, told Marijuana Moment that the institute has generally had a good relationship with DEA over the years and doesn’t expect that it would unduly deny their application in retaliation for the institute’s repeated legal actions against the agency.

“I couldn’t fathom that that would happen, but I hope that the merits of our application are so clear that it would carry us forward,” she said. However, these licensing agreements are “not always a merit-based process so it is possible that if politics get deeply involved here that there could be a situation where licenses are awarded to friends of the government. We’re still praying that there is some merit-based system.”

Researchers and lawmakers have made clear that the current availability of federally authorized cannabis for research raises questions about the accuracy of tests that rely on it, as the quality is insufficient. As of now, there’s only one facility at the University of Mississippi that’s authorized to grow cannabis for researchers. The products developed at the university have been widely criticized by scientists and lawmakers. A study indicated that the facility’s cannabis is chemically more similar to hemp than marijuana available in state-legal markets.

“If adopted, these proposed rules would radically overhaul how medical marijuana manufacture and research will proceed in this country,” the plaintiffs wrote. “Better supply is needed for better research, and better research is needed not only because millions use medical marijuana every day, but also to facilitate informed policymaking at the federal and state levels, including legislation and drug scheduling decisions.”

Read the full lawsuit against DEA below:

SRI FOIA Complaint by Marijuana Moment on Scribd

Federal Agency Touts Hemp Progress While Refusing To Serve Marijuana Businesses

Photo courtesy of Mike Latimer.

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First Legal Marijuana Home Deliveries Begin In Colorado

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For the first time, people in Colorado will be able to legally have marijuana products delivered directly to their homes starting on Friday.

The launch of the limited program focused on medical cannabis patients comes one week after the dispensary chain Native Roots announced that its Boulder location The Dandelion had received the state’s first marijuana delivery license. And while the license wasn’t related to the coronavirus outbreak, the timing is opportune, as officials have increasingly cautioned against leaving home to avoid catching or spreading the virus.

The delivery service will be limited to patients living in either Boulder or Superior. They must also be registered with the dispensary, and those who are not already signed up must do so in-person for the time being—though Native Roots said it is “looking into a compliant, remote solution for patient registration.”

Native Roots said there is a $100 minimum purchase, and they’re encouraging patients to pay with a debit card rather than cash, presumably because drivers could be targets of burglaries if they’re transporting large amounts of cash or because of concerns that money changing hands could further the spread of COVID-19.

Cannabis delivery services are a new feature of Colorado’s legal marijuana program. Gov. Jared Polis (D) signed legislation last year allowing the option, though individuals jurisdictions must proactively opt-in, so as of now that number of cities permitting deliveries is limited. Native Roots said it’s been engaging with local governments about the issue for months.

Deliveries for recreational cannabis consumers won’t begin until January 2021 under the law.

As more businesses shutter as a result of the pandemic, there’s growing demand for alternative means of obtaining marijuana products, and several states have taken steps to address that concern by encouraging deliveries and curbside pickup, for example.

For patients and reform advocates, that represents an ideal solution compared to closing dispensaries altogether. Numerous legal states have categorized cannabis shops as essential services that are exempt from mandates to close down. And according to a poll released this week, a majority of Americans agree with that decision.

But while the market remains largely operational in the midst of this health crisis, reform advocates across the U.S. are feeling the impact and struggling to continue campaign activities, including in-person signature gathering.

Campaigns to change state marijuana programs, legalize psilocybin mushrooms, legalize psilocybin for therapeutic purposes, legalize medical and recreational cannabis, decriminalize psychedelics and broadly decriminalize drug possession have all faced challenges amid the pandemic, and several have implored officials to allow electronic signature gathering to overcome the barrier.

An exception to this appears to be Arizona, where activists recently said they’ve collected more than enough signatures at this point to qualify for the state’s November ballot.

Arizona Marijuana Activists Have More Than Enough Signatures To Put Legalization On Ballot, They Say

Photo courtesy of Philip Steffan.

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 Agency Touts Hemp Progress While Refusing To Serve Marijuana Businesses

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The federal Small Business Administration (SBA) is celebrating the potential of hemp and is urging federal regulators to address concerns from farmers before rules for the crop are finalized. At the same time, however, it is maintaining that it cannot service marijuana businesses due to ongoing federal prohibition.

In a blog post published on Tuesday, SBA’s Office of Advocacy described the wide range of uses for hemp, including rope and CBD oil, and detailed the crop’s evolution from a federally controlled substance to an agricultural commodity that was legalized through the 2018 Farm Bill.

“From rope to clothing, biodiesel to hempcrete, plant-based ingestible protein to CBD balm, the uses of hemp are far-reaching.”

The U.S. Department of Agriculture (USDA) now has jurisdiction over the plant, and it released an interim final rule last year outlining guidelines for a domestic hemp program. In the time since the crop’s legalization, SBA says it has “embarked on an ambitious and lengthy outreach effort to hear from small businesses” and heard feedback from farmers about how USDA’s proposed rules could impact their operations.

“Advocacy staff were first introduced to the concerns that many other producers would later echo” during those outreach events, the post states. “Advocacy also learned about the concerns that educational institutions have with the program, and the wide reach the rule would have if left as-is without modification.”

During a trip to a Virginia hemp farm, for example, the agency “learned about the various non-CBD uses for hemp, and that the rule as written would stifle the ability of small producers to grow for purposes other than manufacturing CBD products.”

“The one commonality that all stakeholders expressed was the ‘chilling’ effect the rule would have on the hemp industry.”

SBA also hosted its own forum on hemp issues in Pennsylvania “where concerns were raised about the length of time between testing and harvest, especially for those growers that do not use technology, such as Amish communities,” the agency reported.

To address such issues, SBA was one of numerous organization to submit feedback on USDA’s interim final rule during a public comment period. In its letter, the agency identified several potentially problematic provisions of the proposed rule, including the THC testing window, maximum THC limit and restricted authorized testing methods.

USDA took much of that feedback and announced last month that it would temporarily suspend enforcement of certain policies, including the requirement that test be conducted by Drug Enforcement Administration-registered labs. However, it said it couldn’t make other changes such as raising the THC threshold because that it a statutory matter that must be resolved by Congress.

“At this stage, Advocacy and the regulated community are eagerly awaiting further action from the agency including additional guidance, and the publication of a final rule by fall of 2021,” SBA said in the new blog post. “The hemp community is hopeful that the agency will consider some key modifications to the rule so that hemp can blossom into a successful industry.”

While SBA evidently is standing strong with the legal hemp industry, cannabis reform advocates have expressed frustration that the agency’s services—particularly concerning disaster relief loans—are unavailable to marijuana businesses who might be in need of additional support amid the coronavirus outbreak.

SBA confirmed in tweet and a statement this week that it cannot provide those services so long as marijuana remains a federally controlled substance, unlike hemp.

Americans Want Medical Marijuana Dispensaries To Stay Open As ‘Essential Services,’ Poll Finds

Photo courtesy of Pixabay.

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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