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:
Feds Send Warning Letter To Another CBD Company Over Medical Claims
The Food and Drug Administration (FDA) and Federal Trade Commission (FTC) sent a warning letter to a Florida-based CBD company on Tuesday, alleging that the business made several unsanctioned claims about the therapeutic benefits of their products.
The federal agencies accused Rooted Apothecary of unlawfully asserting that their cannabidiol products could treat symptoms of conditions such as ADHD, Parkinson’s disease, ear aches, ADHD and autism. Those claims appeared on the company’s website and social media accounts, they said.
Certain products appeared to be marketed as dietary supplements, which FDA currently prohibits as it works to develop an alternative regulatory scheme for CBD.
“Cannabis and cannabis-derived compounds are subject to the same laws and requirements as FDA-regulated products that contain any other substance,” Acting FDA Commissioner Ned Sharpless said in a press release. “We are working to protect Americans from companies marketing products with unsubstantiated claims that they prevent, diagnose, treat, or cure a number of diseases or conditions.”
FDA and FTC have issued a joint warning letter to a company marketing unapproved cannabidiol products with unsubstantiated claims to treat teething and ear pain in infants, autism, ADHD, Parkinson’s and Alzheimer’s disease, among other conditions/diseases. https://t.co/tsn4SBiGzH pic.twitter.com/sG3wyURMDS
— Dr. Ned Sharpless (@FDACommissioner) October 22, 2019
We’ve sent numerous warning letters that focus on matters of significant public health concern to CBD companies, and these actions should send a message to the broader market about complying with FDA requirements.
— Dr. Ned Sharpless (@FDACommissioner) October 22, 2019
“We’ve sent numerous warning letters that focus on matters of significant public health concern to CBD companies, and these actions should send a message to the broader market about complying with FDA requirements,” he said. “As we examine potential regulatory pathways for the lawful marketing of cannabis products, protecting and promoting public health through sound, science-based decision-making remains our top priority.”
FTC’s complaint with the company is that it violated a law that requires businesses that advertise medical claims about their products to have “competent and reliable scientific evidence” to back them up, which could include human clinical trials. Making or exaggerating such claims through “a product name, website name, metatags, or other means” without proper evidence is also prohibited.
FTC and @US_FDA warn Florida company marketing CBD products about claims related to treating autism, ADHD, Parkinson’s, Alzheimer’s, and other medical conditions: https://t.co/cAbxPPcxk8 pic.twitter.com/GdlttyBgxv
— FTC (@FTC) October 22, 2019
Rooted Apothecary must respond to the agencies within 15 working days to explain what steps it’s taking to resolve the issues. If the company fails to do so, it is subject to legal action, including the possible seizure of its products or an injunction. It may also have to compensate customers.
FDA emphasized that CBD products—other than the prescription medication Epidiolex, for the treatment of intractable epilepsy—are not currently allowed. But it also reiterated that the agency is in the process of developing rules that could allow for the lawful marketing of the compound.
In April, FDA sent warning letters to three other CBD companies that it said was making unauthorized claims about the medical benefits of their products. FTC also submitted warning letters to three separate CBD companies for allegedly advertising misleading statements about their products last month.
These letters are examples of the agency’s use of enforcement discretion. Former FDA Commissioner Scott Gottlieb, who recently suggested that the federal government should be involved in regulating state marijuana programs, clarified in March that the agency is only going after companies that make especially misleading claims about their products.
Senate Majority Leader Mitch McConnell (R-KY), who championed a provision of the 2018 Farm Bill federally legalizing hemp and its derivatives, has urged FDA to clear a path for the lawful marketing of CBD products by using enforcement discretion while it develops an interim final rule. A bipartisan group of lawmakers made a similar request in a letter sent to the agency last month.
“The FDA is working quickly to further clarify our regulatory approach for products containing cannabis and cannabis-derived compounds like CBD while using all available resources to monitor the marketplace and protect public health by taking action as needed against companies,” FDA Principal Deputy Commissioner Amy Abernethy said.
FDA’s working quickly to further clarify our regulatory approach for products with cannabis/cannabis-derivatives like CBD while using all available resources to monitor the marketplace & protect public health by taking action as needed against companies. https://t.co/HB9IhG2qud
— Dr. Amy Abernethy (@DrAbernethyFDA) October 22, 2019
We are committed to advancing our regulation of these products through an approach that, in line with our mission, prioritizes public health, fosters innovation and promotes consumer confidence. We plan to provide an update on our progress in this area in the near future.
— Dr. Amy Abernethy (@DrAbernethyFDA) October 22, 2019
“We recognize that there is significant public interest in cannabis and cannabis-derived compounds; however, we must work together to fill in the knowledge gaps about the science, safety and quality of many of these products,” she said. “We are committed to advancing our regulation of these products through an approach that, in line with our mission, prioritizes public health, fosters innovation and promotes consumer confidence.”
Photo courtesy of Kimzy Nanney.
GOP Senator Links Medical Marijuana Claims To Tobacco Industry Advertisements
Sen. John Cornyn (R-TX) said on Tuesday that claims about the therapeutic potential of marijuana remind him of decades-old tobacco industry advertisements asserting that the product had medical benefits.
In a speech on the Senate floor, Cornyn discussed a hearing that the International Narcotics Control Caucus, which he co-chairs, will hold on Wednesday to explore the public health impacts of cannabis. He said it was especially important to hear from experts about the subject as more states legalize marijuana and members of Congress, as well as Democratic presidential candidates, push to end federal prohibition.
Senate Hearing To Focus On Marijuana And Health This Week – https://t.co/aPZczm3X75
— Senator John Cornyn (@JohnCornyn) October 21, 2019
The senator made clear he’s skeptical about marijuana’s health benefits.
“There’s no shortage of people who claim that marijuana has endless health benefits and can help patients struggling from everything from epilepsy to anxiety to cancer treatments,” he said. “This reminds me of some of the advertising we saw from the tobacco industry years ago where they actually claimed public health benefits from smoking tobacco, which we know as a matter of fact were false and that tobacco contains nicotine, an addictive drug, and is implicated with cancers of different kinds.”
“We’re hearing a lot of the same happy talk with regard to marijuana and none of the facts that we need to understand about the public health impact of marijuana use,” he said.
While Cornyn recognized there’s significant support for cannabis reform, he said that ” for the number of voices in support of legalization, there are even more unanswered questions about both the short- and long-term public health effects.”
He expressed concern about increased levels of THC concentration in cannabis products and stated that it’s “true that for some people that marijuana can indeed be addictive.”
“There’s simply a lack of scientific evidence to determine the link between marijuana and various health risks, and that’s something I would think Congress and the American people would want to know before we proceed further down this path,” Cornyn said. “We don’t know enough about how this could impair cognitive function or capacity or increase the risk of mental illness or perhaps serve as a gateway for other drugs that are even more damaging to the health of a young person.”
The senator made similar remarks during a conversation with a former White House drug czar in August. He said it was important to address the public health impacts of cannabis before moving forward with legislation that would protect banks that service marijuana businesses from being penalized by federal regulators.
“With increasing use and a growing number of states giving the green light for marijuana use, we need better answers,” he said.
The surgeon general and the director of the National Institute on Drug Abuse, along with several academics, are scheduled to testify at Wednesday’s hearing.
Photo courtesy of C-SPAN.
Michael J. Fox Parkinson’s Foundation Urges Congress To Pass Three Marijuana Research Bills
A leading advocacy group that’s dedicated to finding treatment options for Parkinson’s disease is backing three pieces of marijuana research legislation in Congress.
The Michael J. Fox Foundation (MJFF)—named after the actor, who has Parkinson’s and established the nonprofit—said last week that lifting barriers to cannabis research, including rescheduling the plant under the Controlled Substances Act (CSA), is necessary to promote studies verifying marijuana’s potential therapeutic benefit for conditions such as Parkinson’s patients.
“The MJFF supports increased access to cannabis for medical research. Congress has begun to recognize this need, and there are several bills in the U.S. House and Senate designed to remove barriers that impede safe and legal access to cannabis by medical researchers,” the foundation said on its website. “The MJFF public policy team is tracking these bills and working to educate members of Congress and their staff on their importance to the Parkinson’s community.”
MJFF said it’s in favor of three marijuana bills, which would accomplish the following:
—Require the Justice Department to approve additional manufacturers for research-grade cannabis.
—Protect research institutions that conduct studies on marijuana.
—Authorize the U.S. Department of Veterans Affairs (VA) to inform patients about opportunities to participate in federally authorized cannabis studies.
—Require VA to conduct studies into the therapeutic potential of marijuana in the treatment of various conditions that commonly afflict veterans such as chronic pain and post-traumatic stress disorder.
—Reschedule marijuana from Schedule I to Schedule III under the CSA.
—Free up universities to conduct studies on cannabis by removing certain regulatory requirements.
In a letter to the Senate sponsor of that last piece of legislation, Sen. Dick Durbin (D-IL), in June, the foundation stated that marijuana’s current classification under federal law and the inadequate quality of cannabis grown at the only federally authorized manufacturing facility has meant that “researchers do not have the proper materials to conduct the necessary research.”
The foundation noted that it has submitted comments to the Food and Drug Administration arguing in favor of rescheduling in 2018 and 2019. It also applauded the Drug Enforcement Administration for announcing that it would take steps to approve additional federal cannabis farms for research.
“Current policies hinder comprehensive medical research on cannabis, making it difficult to generate the evidence needed for clear recommendations,” Andrew Koemeter-Cox, MJFF’s associate director of research programs, said. “This is especially problematic when some products may be unsafe for human use and have the potential for adverse interactions with other medications.”
Ted Thompson, the nonprofit’s senior vice president of public policy, said that removing barriers to research “is one way in which Congress can help scientific researchers determine what the benefits of medical cannabis might be for Parkinson’s disease.”
“Our role on the public policy team is to work with Congress and the administration to ensure there is access and funding for research and care initiatives that can benefit people living with Parkinson’s and, right now, that includes access to medical cannabis for research,” he said.
Photo courtesy of Brian Shamblen.