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Hemp Businesses Need Clarity On Credit Card Processing, GOP Congressman Tells Federal Regulators

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One day after federal financial regulators issued guidance relaxing requirements for banks doing business with hemp companies, Rep. Andy Barr (R-KY) called for further input on how financial institutions can work with the industry—particularly when it comes to credit card processing.

“I have heard from Kentucky bankers about this. They welcome this guidance, and it will go a long way to help the hemp industry thrive,” Barr said on Wednesday at a House Financial Services Committee hearing.

But after thanking witnesses—including Federal Deposit Insurance Commission (FDIC) Chairwoman Jelena McWilliams and National Credit Union Association (NCUA) Chairman Rodney Hood—he reminded them that there is still much work to be done to give hemp businesses fair access to financial services.

Specifically, Barr called credit card processing services for Kentucky hemp companies “unreliable” and “unavailable” while pointing out that Tuesday’s hemp banking memo failed to clearly address the problem.

“I’ve read the guidance closely, as you can tell, and I didn’t see that in there,” Barr said. “That’s the financial service that has really been unreliable and spotty, so if you need to update that guidance to give more clarity to card processing businesses, that might be in order.”

McWilliams replied that her agency would “certainly take a look” at the issue and offered that “to the extent that we need to do additional explaining, we are more than happy to engage in that process.”

In response, Barr reminded her of the broader goals of congressional action to legalize hemp products under the 2018 Farm Bill.

“Congressional intent is not only that the regulators confirm the legality of industrial hemp and hemp related retailers under the Farm bill, but that those retailers and merchants can use card processing services to sell the product itself,” he said.

Watch Barr press federal regulators on hemp business credit card processing below:

This isn’t the first time Barr has raised the issued of hemp businesses’ ability to accept payments with cards.

“I’ve had constituent businesses tell me that their access to financial products, specifically card services, have actually deteriorated since we descheduled industrial hemp in the Farm Bill,” he said at an earlier hearing in May. “This obviously conflicts with congressional intent.”

The congressman’s questions and comments at the most recent hearing are emblematic of a larger bipartisan push to provide updated regulations to the hemp industry and banks that work with it.

Most notably, the House overwhelmingly approved the Secure and Fair Enforcement (SAFE) Banking Act in September. The legislation would protect banks and credit unions from being penalized by federal regulators for working with marijuana businesses, and Barr added an amendment clarifying that the protections also apply to hemp companies.

However, the vote came later than some observers expected, which may help explain why the growth in the number of financial institutions working with cannabis companies seems to have slowed down in the prior quarter of the fiscal year.

NCUA’s Hood, whose agency’s earlier hemp guidance released in August was among the first federal clarifications on the issue after the Farm Bill became law, testified on Wednesday about the steps NCUA is taking to open up access to financial services for companies in the industry.

“We are continuing to work with the industry to provide training to our examiners,” Hood said. “We will now be working with the [U.S. Department of Agriculture] and other related parties to ensure that we get it right. We will be hosting a series of roundtables to gain insights from entities around best practices.”

In submitted testimony, he wrote that NCUA expects “to continue updating the credit union community now that the USDA has published its interim final rule [for hemp]” and said the agency has “received interest from credit unions eager to know the rules of the road for serving hemp-related businesses in their communities, and we want to make sure those credit unions have what they need to make informed decisions in this area.”

Jospeh Otting, comptroller of the currency, also discussed the latest guidance from federal regulators in testimony he submitted to the panel, writing that the joint statement from federal regulators “provides clarity regarding the legal status of commercial growth and production of hemp and relevant requirements for banks.”

Also discussed at the hearing was NCUA’s recent regulatory action on employment at credit unions by people with criminal records. Initially proposed by the agency in July, the move to allow participation by people convicted of minor offenses like simple drug possession was officially enacted by this week.

Asked by Rep. Brad Sherman (D-CA) “what are you doing, and what can Congress do” to assist in the advancement of the so-called “second chance” decision, Hood responded that NCUA “recognized that individuals who have committed nonviolent criminal offenses who have paid their debts to society should have opportunities to work in federal credit unions.”

McWilliams called the second chance decision an “important social justice issue” and said FDIC is currently seeking input on how best to move forward. “I personally believe we can go a long way to enabling those individuals to re-enter the workforce,” she said.

Watch lawmakers and regulators discuss financial services employment by people with prior convictions below:

Outside of the House Financial Services panel, several lawmakers on Capitol Hill have recently pushed to make business easier for hemp companies.

Last week, for example, Senate Minority Leader Chuck Schumer (D-NY) called on USDA to extend its public comment period for proposed hemp regulations. And in October, Sens. Ron Wyden (D-OR) and Jeff Merkley (D-OR) sent a letter to USDA asking for five specific changes in the rules.

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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.

Raj is a cannabis policy reporter based in Washington, D.C. He also covers politics for DOPE Magazine and Leafly, focusing on social justice and equity in the industry.

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Legal Marijuana States Have Generated Nearly $8 Billion In Tax Revenue Since Recreational Sales Launched, Report Finds

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States that have legalized marijuana for adult use have collectively generated nearly $8 billion in tax revenue from cannabis since legal sales first began in 2014, according to a new report from the Marijuana Policy Project (MPP).

The analysis examined the tax structure and revenue streams of all 18 states that have legalized recreational cannabis, though sales have not launched yet in seven of those states. Overall, it shows that establishing regulated marijuana markets gives states a steady and generally growing source of revenue that can support various programs and services.

Last year alone, the adult-use states collected $2.7 billion in taxes from cannabis sales. And as more markets come online and others mature, that’s expected to continue to grow.

For example, California took in more than $1 billion in tax revenue from recreational marijuana in 2020—a 62 percent increase from 2019.

Illinois has consistently been breaking monthly cannabis sales records since its program started in January 2020, and if the trend keeps up, it could create upwards of $1 billion in tax revenue this year. For the first time, marijuana taxes outpaced those derived from alcohol in the state last quarter.

The report does not factor in local tax revenue that individual municipalities may impose on cannabis sales, like in Denver where residents pay an additional 5.5 percent tax that has generated hundreds of thousands of dollars for the city.

“Legalizing cannabis for adults has proven to be a wise investment,” Jared Moffat, state campaigns manager at MPP, said in a press release. “Not only are states seeing the benefits of a regulated market and far fewer cannabis-related arrests—they’re benefitting in a direct, economic way, too.”

MPP also broke down different ways that adult-use states are using those tax dollars.

In Colorado, $404.5 million in marijuana tax revenue has supported the state’s public school system. Oregon invests 40 percent of its cannabis revenue to public education, as well as 25 percent to fund mental health and treatment programs. And in California, $100 million in cannabis tax dollars have gone to community groups to help people most impacted by punitive drug laws.

“Before legalization, money from cannabis sales flowed through an underground market that endangered public safety and disrupted communities. But now, we see all across the country that revenue from the legal cannabis industry is supporting schools, health care, and a range of other beneficial public programs,” Moffat said. “It’s no wonder that residents in legalization states overwhelmingly see legalization as a success.”

Reform advocates aren’t the only ones interested in seeing how states are approaching the tax side of marijuana legalization. The U.S. Census Bureau also has plans to begin collecting and compiling data on revenue that states generate from legal cannabis.

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Illinois Will ‘Blow Past’ $1 Billion In Legal Marijuana Sales In 2021, Chamber Of Commerce President Says

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“Are we going to get to a billion dollars? I think we’re going to blow past the billion dollars based on the experience in smaller states,” the Chamber leader said.

By Elyse Kelly, The Center Square

Illinois’s cannabis industry is growing up fast, with adult-use recreational cannabis sales expected to hit $1 billion by year-end.

In March alone, Illinoisans spent $110 million on recreational marijuana.

Todd Maisch, president and CEO of the Illinois Chamber of Commerce, said one factor contributing to Illinois’ explosive growth is that most neighboring states haven’t legalized marijuana yet.

“What we saw early on in states like Washington and Colorado is they did have demand come in from surrounding states, which frankly benefits our industry and benefits the taxes collected,” Maisch said.

Cannabis sales have already surpassed alcohol’s tax revenues for the state, and Maisch said he thinks $1 billion estimates are conservative.

“Are we going to get to a billion dollars? I think we’re going to blow past the billion dollars based on the experience in smaller states,” Maisch said.

There are only a couple of things that could stop Illinois’ explosive cannabis market growth, Maisch said. He said that policymakers could ruin things by pushing taxes too high as evidenced by the tobacco market.

“As taxes have gone up and up and up, they’ve pushed people all the way into the black market or they’ve created this grey market in which people are ostensibly paying some of the taxes, but they’re still getting sources of tobacco products that avoid much of the tax,” Maisch said.

The other thing that could head off continued growth is other states opening up recreational-use markets.

“So if you start to see surrounding states go to recreational, that’s definitely going to flatten the curve because we’re not going to be pulling in demand from other states,” Maisch said.

Maisch points out some concerns that accompany the explosion of Illinois’s recreational cannabis market including workforce preparedness.

“All of those individuals who are deciding to go ahead and consume this product are really taking themselves out of a lot of job opportunities that they would otherwise be qualified, so there’s a real upside and a downside,” Maisch said.

While it’s easy to track the revenues this industry brings into state coffers, he points out, it will be harder to track the lack of productivity and qualified individuals to operate heavy machinery and other jobs that require employees to pass a drug test.

This story was first published by The Center Square.

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Missouri Regulators Derail Medical Marijuana Business Ownership Disclosure Effort With Veto Threat

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Missouri regulators say they feel requiring medical marijuana business license ownership disclosures under a House-approved amendment could be unconstitutional, and they may urge the governor to veto the legislation. 

By Jason Hancock, Missouri Independent

An effort by lawmakers to require disclosure of ownership information for businesses granted medical marijuana licenses was derailed on Thursday, when state regulators suggested a possible gubernatorial veto.

On Tuesday, the Missouri House voted to require the Department of Health and Senior Services provide legislative oversight committees with records regarding who owns the businesses licensed to grow, transport and sell medical marijuana.

The provision was added as an amendment to another bill pertaining to nonprofit organizations.

Its sponsor, Rep. Peter Merideth, D-St. Louis, said DHSS’s decision to deem ownership records confidential has caused problems in providing oversight of the program. He pointed to recent analysis by The Independent and The Missourian of the 192 dispensary licenses issued by the state that found several instances where a single entity was connected to more than five dispensary licenses.

The state constitution prohibits the state from issuing more than five dispensary licenses to any entity under substantially common control, ownership or management.

On Thursday, a conference committee met to work out differences in the underlying bill between the House and Senate.

Sen. Eric Burlison, a Republican from Battlefield and the bill’s sponsor, called the medical marijuana amendment an “awesome idea. I think it’s awesome.”

However, he said opposition from the department puts the entire bill in jeopardy.

“The department came to me,” he said, “and said they felt that this was unconstitutional.”

DHSS has justified withholding information from public disclosure by pointing to a portion of the medical marijuana constitutional amendment adopted by voters in 2018 that says the department shall “maintain the confidentiality of reports or other information obtained from an applicant or licensee containing any individualized data, information, or records related to the licensee or its operation… .”

Alex Tuttle, a lobbyist for DHSS, said if the bill were to pass with the medical marijuana amendment still attached, the department may recommend Gov. Mike Parson veto it.

The threat of a veto proved persuasive, as several members of the conference committee expressed apprehension about the idea of the amendment sinking the entire bill.

Merideth said the department’s conclusion is incorrect. And besides, he said, the amendment is narrowly tailored so that the information wouldn’t be made public. It would only be turned over to legislative oversight committees.

Rep. Jered Taylor, R-Republic, chairman of the special committee on government oversight, said the amendment is essential to ensure state regulators “are following the constitution, that they’re doing what they’re supposed to be doing.”

The medical marijuana program has faced intense scrutiny in the two years since it was created by voters.

A House committee spent months looking into widespread reports of irregularities in how license applications were scored and allegations of conflicts of interest within DHSS and a private company hired to score applications.

In November 2019, DHSS received a grand jury subpoena, which was issued by the United States District Court for the Western District. It demanded the agency turn over all records pertaining to four medical marijuana license applications.

The copy of the subpoena that was made public redacted the identity of the four applicants at the request of the FBI. Lyndall Fraker, director of medical marijuana regulation, later said during a deposition that the subpoena wasn’t directed at the department but rather was connected to an FBI investigation center in Independence.

More recently, Parson faced criticism for a fundraiser with medical marijuana business owners for his political action committee, Uniting Missouri.

The group reported raising $45,000 in large donations from the fundraiser. More than half of that money came from a PAC connected to Steve Tilley, a lobbyist with numerous medical marijuana clients who has been under FBI scrutiny for more than a year.

This story was first published by Missouri Independent.

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