The heads of five federal financial regulatory agencies have replied to a letter from Sen. Michael Bennet (D-CO) that requested clarification on banking services hemp businesses.
The responses, which Bennet’s office provided exclusively to Marijuana Moment, each recognize that hemp was legalized through the 2018 Farm Bill—meaning the rules governing how financial institutions interact with these businesses have changed.
The chair of one body clarified that federal reporting guidelines in place for institutions that work with marijuana businesses no longer apply to hemp companies and said she has “personally discussed the changes during banker outreach meetings both in Washington, D.C. and across the country.”
But the five letters—from the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Farm Credit Administration (FCA) and National Credit Union Administration (NCUA)—varied with regard to what the agencies said they were actively doing, or plan to do, to clear up remaining confusion within the financial sector.
Bennet, a 2020 Democratic presidential candidate, has made much of the hemp industry’s potential, especially as it concerns his home state of Colorado. His initial June inquiry emphasized the role hemp is playing for his constituents and raised concerns about instances in which hemp businesses are still unable to access credit and other banking services despite the crop’s legalization.
“Hemp farmers and processors have made clear that the lack of access to the banking system is a significant hurdle to growing their business,” Bennet told Marijuana Moment. “While I appreciate the response from the banking regulators, it’s clear that more needs to be done to provide banks and credit unions with the assurance and clarity needed to remove this major barrier facing the hemp industry.”
Here’s what the agencies said in response to the senator’s request that they issue guidance clarifying hemp businesses’ ability to access financial services:
Chairman Jerome Powell said that the agency expects banks it supervises to apply “adequate policies, procedures, and processes to address appropriately the risks associated with the particular relationship as required under the Bank Secrecy Act,” and that includes hemp businesses.
“The decision to open, to close, or to decline a particular account is generally made by the financial institution without involvement of the federal regulator,” he wrote.
“The Board does not currently plan to issue guidance specific to this area, because it is our expectation institutions will apply their established policies, procedures and practices to their hemp industry customers, but we will continue to monitor this issue,” Powell said.
FDIC has “received a number of questions regarding the changes made by the 2018 Farm Bill, some of which we are able to answer, but many of which are outside our jurisdiction,” Chair Jelena McWilliams said.
“Nevertheless, we have taken a number of steps to inform financial institutions and our examiners about the changes,” which includes discussing the issue at a meeting of community bankers in March as well as personal conversations McWilliams has had during banker outreach events.
Additionally, FDIC is “in the process of providing training to our examiners on changes to the legal status of hemp and instructing them that the suspicious activity filing requirements prescribed by the Financial Crimes Enforcement Network for cannabis do not apply to hemp.”
McWilliams wrote that financial providers should assess risk on a “case-by-case basis, rather than declining to provide banking services to entire categories of customers.”
“You have my assurance that we will continue to maintain a dialogue with the institutions we supervise to reinforce this policy regarding the provision of services to legal hemp businesses,” she concluded.
Comptroller of the Currency Joseph Otting said that his agency “supports the institutions it supervises in providing banking services to any category of customers operating in compliance with applicable law” and that “[d]ecisions on the provision of financial services are bank business decisions and matters of banker judgement,” which also applies to hemp businesses.
“We expect these general requirements to apply to relationships established and maintained with legal hemp farms and producers,” he wrote.
“The OCC does not currently plan to issue guidance specific to this area,” Otting said, “because we expect OCC-supervised banks to apply their established policies, procedures, and practices to legal hemp farmers and producers. Nevertheless, we will continue to monitor this issue.”
Jeffery Hall, acting CEO of FCA, directed Bennet to a memorandum the agency previously issued in April that “outlines our exception for System institutions to develop underwriting standards for hemp production and processing to take into account applicable federal and state laws, growing conditions, and marketing opportunities.”
The memo stated that “now that there is more clarity and direction regarding the legality of hemp production, each individual System institution should determine when and under what conditions to finance producers or processors of hemp.”
Hall told Bennet that his agency “will continue to closely monitor USDA’s development of hemp program authorized by the 2018 Farm Bill and will provide additional guidance as necessary.”
“I share your concern that hemp farmers and processors may lack access to the financial services system,” NCUA Chairman Rodney Hood wrote. “Full access to the system will better enable these farmers and processors across the country to make investments in their businesses and create jobs.”
“Unfortunately, until the Department of Agriculture completes their regulations and guidelines for this program, the uncertainty for financial institutions will likely remain,” he said, referring to the ongoing rulemaking process at USDA that Secretary Sonny Purdue said would be in place in time for the 2020 planting season.
“The NCUA is working on possible future guidance to financial institutions in this area, and we are consulting with FinCEN and other federal banking agencies,” he said. “Opening, closing, or declining a particular account is a business decision for the credit union.”
“Once we are able to provide more clarity, credit unions will be able to make more informed decisions,” Hood added. “As with any such business decision, credit unions should consider their objective, evaluate the risks, and determine their capacity to manage those risks.”
Bennet isn’t the only lawmaker pushing for clarification post-hemp legalization. Another champion of the crop, Senate Minority Leader Chuck Schumer (D-NY) sent a similar letter seeking guidance on the issue from federal financial regulators on Monday.
Senate Majority Leader Mitch McConnell (R-KY), a chief proponent of hemp legalization, has also put pressure on financial institutions to ensure that hemp businesses have the same access to banking services such as federal crop insurance since the crop was legalized. The senator wrote to federal regulators about the issue in April and this week penned an op-ed detailing his work to ensure that the hemp industry is properly supported.
A top Federal Reserve official was also pressed on what the agency is doing to resolve confusion around hemp during a Senate hearing in June. The official told Sen. Jon Tester (D-MT) that her agency “will try to clarify” that servicing hemp businesses is not illegal.
Outside of the hemp realm, there’s also a growing, bipartisan call to protect banks that service state-legal marijuana businesses. The House Financial Services Committee approved legislation to allow banks to service these businesses in March, and the Senate Banking Committee held a hearing on the issue last month.
Chairman Mike Crapo (R-ID), who earlier this year indicated that his panel wouldn’t hold a hearing on marijuana banking while the substance was federally illegal, has since backed developing a legislative resolution to the issue.
Read Bennet’s initial letter on hemp banking and the agencies’ replies below:
Nine Members Of Congress Tell DEA To Revise Proposed Hemp Rule On THC Content
Nine members of Congress sent a letter to the Drug Enforcement Administration (DEA) on Tuesday, urging the agency to revise its proposed hemp regulations.
DEA released an interim final rule (IFR) for the crop in August, and it said the regulations were simply meant to comply with the 2018 Farm Bill that legalized hemp and its derivatives. But stakeholders and advocates have expressed serious concerns about certain proposals, arguing that they could put processors at risk of violating federal law and hamper the industry’s growth.
Reps. David Joyce (R-OH) and Denver Riggleman (R-VA) led the letter and pointed specifically to a provision of DEA’s IFR that could impact processing hemp extracts. The agency stipulated that “any such material that contains greater than 0.3% of Δ9-THC on a dry weight basis remains controlled in schedule I.”
That’s problematic, the lawmakers said, because in many cases the process of extracting cannabinoids from hemp temporarily causes THC levels to increase beyond that threshold. And so while Congress intended to legalize those extracts, businesses that produce the materials could find themselves inadvertently breaking the law.
I sent a letter to the @DEAHQ asking them to protect hemp producers and clarify hemp regulations.
The DEA must specify their requirements and streamline hemp directives by clarifying the legal means of processing hemp products. Read more here, #VA05:https://t.co/wGabQePrts
— Congressman Denver Riggleman (@RepRiggleman) October 21, 2020
“Our offices have received countless calls from constituents involved in the hemp industry who are extremely fearful that simply following the provisions of the Farm Bill will result in criminal liability under the IFR,” the lawmakers’ letter states. “The IFR will likely have the effect of inhibiting these nascent state hemp programs thereby harming those American companies and workers who chose to pursue careers in the hemp industry and made significant investments to effectuate those aspirations.”
Therefore, the lawmakers are “requesting a resolution to this issue as quickly as possible,” adding that “DEA must revise the IFR to eliminate the ambiguities set forth above and provide peace of mind to all Americans who have chosen to pursue a career in the hemp industry.”
Reps. Rodney Davis (R-IL), Morgan Griffith (R-VA), Glenn Grothman (R-WI), Don Young (R-AK), Anthony Gonzalez (R-OH), Earl Blumenauer (D-OR) and Matt Gaetz (R-FL) also signed the letter.
A public comment period on DEA’s proposed rules closed on Tuesday. It saw more than 3,300 submissions, many of which focused on issues with the “work in progress” hemp THC issue.
“This IFR’s criminalizes work in progress hemp extract, a fundamental component of any consumer hemp/CBD product, and will negatively impact the hemp/CBD industry at a time when financial pressure is already high,” one commenter wrote. “Hemp and subsequent extracts are not controlled substances.”
Another issue identified by more than 1,000 commenters concerns delta-8 THC. The most widely known cannabinoid is delta-9 THC, the main component responsible for creating an intoxicating effect, but delta-8 THC from hemp is also psychoactive and is an object of growing interest within the market.
Because DEA’s proposed regulations state that all “synthetically derived tetrahydrocannabinols remain schedule I controlled substances,” some feel that would directly impact the burgeoning cannabinoid, as its converted from CBD through the use of a catalyst—and that could be interpreted as a synthetic production process.
In any case, it’s not clear whether DEA deliberately crafted either of these rules with the intent of criminalizing certain hemp producers—but stakeholders and advocates aren’t taking any chances.
The U.S. Department of Agriculture (USDA) has faced separate criticism over its own proposed hemp rules, though it has been more proactive in addressing them. Following significant pushback from the industry over certain regulations it views as excessively restrictive, the agency reopened a public comment period, which also closed this month.
USDA is also planning to distribute a national survey to gain insights from thousands of hemp businesses that could inform its approach to regulating the market.
Read the congressional coalition’s letter to DEA on its hemp rule below:
Pennsylvania House Votes To Protect Medical Marijuana Patients From DUI Charges
The Pennsylvania House of Representatives approved an amendment on Tuesday that would protect medical marijuana patients from being penalized under the state’s DUI laws for using their legal medicine.
The proposal cleared the chamber as an amendment to a broader piece of legislation concerning motor vehicle policies. It passed in a 109-93 vote.
As it stands, registered medical cannabis patients can be convicted of driving under the influence of a controlled substance if THC metabolites are detected in their blood. That’s despite the fact that marijuana can remain present in the body well after someone is considered impaired.
The House-approved amendment, which is now attached to a bill previously passed by the Senate, exempts “marijuana used lawfully in accordance with” the state’s medical cannabis law from DUI statutes.
“I think that you can ask any veteran or anybody that’s using medical cannabis right now, if they took the prescription on Monday, [on] Wednesday, they’re not high,” Rep. Ed Gainey (D) said in a floor speech before the vote. “And if they got pulled over, they darned shouldn’t be charged for being intoxicated or under the influence of medical marijuana.”
Medical marijuana has helped the people of the Pennsylvania. But even if you have a medical card, you can still get a DUI even if you’re not high – if you have a trace of THC in your system. Today I fought to pass a bill that would end that. pic.twitter.com/uxj8IsuVO9
— Ed Gainey (@RepGainey) October 21, 2020
“I think we’re putting an undue burden on the people of Pennsylvania if we’re saying this is what we want to do after we fought so hard to pass medical marijuana and we know what it’s done to help the people of Pennsylvania,” he said.
The amendment is similar in intent to separate standalone legislation introduced by Sen. Camera Bartolotta (R) in June to end the “zero tolerance” DUI policy for medical marijuana.
While Pennsylvania legalized medical cannabis in 2016, with the first dispensaries opening two years later, the law has not caught up as it concerns impaired driving. A person can test positive for THC for weeks after last consuming marijuana, rendering traditional roadside tests incapable of determining active impairment.
Several legal cannabis states have enacted per se THC limits in blood, similar to blood alcohol requirements. However, evidence isn’t clear on the relationship between THC concentrations in blood and impairment.
A study published last year, for example, concluded that those who drive at the legal THC limit—which is typically between two to five nanograms of THC per milliliter of blood—were not statistically more likely to be involved in an accident compared to people who haven’t used marijuana.
Separately, the Congressional Research Service in 2019 determined that while “marijuana consumption can affect a person’s response times and motor performance… studies of the impact of marijuana consumption on a driver’s risk of being involved in a crash have produced conflicting results, with some studies finding little or no increased risk of a crash from marijuana usage.”
The modest cannabis DUI reform approved by the Pennsylvania House comes amid repeated calls from the state’s leaders to more broadly legalize marijuana for adult use.
Last week, Gov. Tom Wolf (D) in a speech stressed that marijuana reform could generate tax revenue to support the state’s economic recovery from the coronavirus pandemic and that ending criminalization is necessary for social justice.
That marked the third time in three months that the governor has held events focused on making the case for legalization. Last month, he took a dig at the Republican-controlled legislature for failing to act on reform in the previous session. And in August, he suggested that the state itself could potentially control marijuana sales rather than just license private retailers as other legalized jurisdictions have done.
Lt. Gov. John Fetterman (D), a longstanding legalization advocate, has been similarly vocal about his position. In speeches and on social media, the official has expressed frustration that Pennsylvania has yet to enact the policy change, especially as neighboring like New Jersey are moving in that direction.
He said last month that farmers in his state can grow better marijuana than people in New Jersey—and that’s one reason why Pennsylvania should expeditiously legalize cannabis before voters next door in the Garden State enact the policy change this November.
Fetterman also recently hosted a virtual forum where he got advice on how to effectively implement a cannabis system from the lieutenant governors of Illinois and Michigan, which have enacted legalization.
While Wolf initially opposed adult-use legalization, he came out in support of the reform last year after Fetterman led a statewide listening tour last year to solicit public input on the issue.
Shortly after the governor announced that he was embracing the policy change, a lawmaker filed a bill to legalize marijuana through a state-run model.
A majority of Senate Democrats sent Wolf a letter in July arguing that legislators should pursue the policy change in order to generate revenue to make up for losses resulting from the COVID-19 pandemic.
Montana Supreme Court Rejects Challenge To Marijuana Legalization Initiative
The Montana Supreme Court on Wednesday rejected a lawsuit seeking to invalidate a marijuana legalization initiative that will appear on the state’s November ballot.
With weeks before the election, opponents asked the court to quash the measure, arguing that because it involves appropriating funds, it violates state statute on citizen initiatives.
The court didn’t weigh in on the merits of the challenge; rather, it said the petitioners with the campaign Wrong for Montana (WFM) failed to demonstrate “urgency or emergency factors” that would justify moving the case into its jurisdiction instead of going through trial and appeals courts first.
It left the door open for the opponents to take its challenge through the traditional process. Brian Thompson, the attorney representing the plaintiffs, told Marijuana Moment that they now intend to file the suit in district court “soon,” but he wasn’t able to provide an exact timeline.
“We express no opinion on the merits of WFM’s constitutional challenge, nor to its right to pursue this challenge in district court,” the justices wrote. “However, WFM’s claim does not present an appropriate basis on which to invoke this Court’s original jurisdiction. Even if it did, WFM has wholly failed to establish that urgency or emergency factors make litigation in the trial courts and the normal appeal process inadequate.”
Dave Lewis, policy advisor to the pro-legalization New Approach Montana, said in a press release that this “was an easy decision for the Montana Supreme Court.”
“At best, this lawsuit was a frivolous longshot,” he said. “At worst, it was an intentional effort to create confusion right before the election.”
The measure in question would establish that adult-use marijuana system. The lawsuit did not target a separate, complementary initiative that would specify that only those 21 and older could participate in the legal market.
It is the case that state statute says citizens “may enact laws by initiative on all matters except appropriations of money and local or special laws” and that the initiative does allocate cannabis tax revenue to certain programs. But prior measures that have appeared on the state’s ballot have done so as well.
Under the proposal, half of the public revenue generated from marijuana sales would go toward environmental conservation programs—a provision that earned the campaign key endorsements last month.
The initiative is already on the ballot and voting has started, so presumably if the court had sided with the plaintiffs, the votes simply wouldn’t have been counted or implementation would have been prevented. It is also possible that a court could rule that monies raised by legal cannabis sales under the initiative would simply into the state’s general fund instead of toward the specific programs delineated in its current text.
“We’re receiving strong support from voters across the state,” Lewis, who is a former Republican state senator and former budget director for three Montana governors, said. “Instead of making a coherent argument against the initiatives, our opponents tried to deprive Montanans of their constitutional right to a citizen initiative process.”
“Our opponents are desperately throwing everything at the wall in the hope that something sticks,” he added. “They’re resorting to fear tactics and misinformation because they know that a majority of Montana voters are ready to vote yes on legalizing, regulating, and taxing marijuana for adults 21 and over.”
In neighboring Nebraska, the state Supreme Court did rule last month that a measure to legalize medical cannabis that had qualified for the November ballot could not proceed because it violated the state’s single-subject rule for ballot initiatives.
Recent polling indicates that Montana voters are positioned to approve the legalization proposal. Forty-nine percent of respondents in a survey released last week said they support the policy change, with 39 percent opposed and 10 percent remaining undecided.
This story has been updated to include comment from Thompson.
Read the Montana Supreme Court’s ruling on the marijuana challenge and the original lawsuit below: