A powerful congressional committee voted on Wednesday to reject a measure to protect banks that open accounts for marijuana businesses from being punished by federal financial regulators. Supporters then scrambled to craft a more limited measure focused on medical cannabis businesses, but it was ultimately withdrawn before a vote could take place.
The broader measure would have prevented the U.S. Department of Treasury from taking any action to “penalize a financial institution solely because the institution provides financial services to an entity that is a manufacturer, producer, or a person that participates in any business or organized activity that involves handling marijuana or marijuana products” in accordance with state or local law.
After a lengthy and impassioned debate during which at least 19 lawmakers spoke, it was defeated on a voice vote by the House Appropriations Committee.
Despite the fact that a growing number of states are legalizing marijuana for recreational or medical use, many financial institutions have remained reluctant to work with cannabis businesses for fear of running afoul of money laundering laws under ongoing federal prohibition.
As a result, many marijuana growers, processors and retailers operate on a cash-only basis, which can make them targets for robberies.
The issue is “not whether or not one approves of marijuana,” said Rep. David Joyce (R-OH), the chief sponsor of both banking amendments, before the vote. “This is about public safety and financial transparency.”
Either rider, if it were successfully attached to legislation to fund the Treasury Department for Fiscal Year 2019, would have provided added assurance to banks that federal officials won’t close them down for working with the cannabis industry.
A similar measure was approved by the full House of Representatives in 2014 by a margin of 231 to 192, but was not included in final spending legislation that year, and congressional Republicans have since blocked floor votes on most cannabis measures.
In the lead up to the Wednesday banking vote, several advocates and Capitol Hill staffers expressed confidence in interviews that the measure would pass. But a number of likely Republican supporters were absent during the debate, and others who are sympathetic to marijuana law reform expressed varying concerns about the specific proposal. As a result, supporters did not force a roll call tally following the defeat on a voice voice.
Joyce then went back to the drawing board and crafted the narrower medical-focused amendment, which he hoped would find enough support to pass. But after a brief debate on the second proposal, Chairman Rodney Frelinghuysen (R-NJ) asked Joyce three times to withdraw the amendment instead of forcing a vote. The Ohio congressman twice pressed ahead and said he wanted the committee to weigh in on the measure, only to give in at the last moment and pull the measure.
By seeking to adopt the language in the appropriations panel, before the overall spending bill heads to the Rules Committee, which is where marijuana amendments have gone to die for the past several years, advocates were attempting to circumvent an effective blockade that has prevented progress on cannabis reform in the House.
In a similar move last month, the Appropriations Committee approved a measure to protect state medical cannabis laws from Justice Department interference following several instances of that measure being blocked by the Rules Committee.
In a separate sign of the mainstreaming of marijuana politics on the other side of the Capitol, on Wednesday the Senate Appropriations Subcommittee on Commerce, Justice, Science and Related Agencies included that far-reaching medical marijuana language in the initial version of the Justice Department funding bill as introduced by Republican leaders, meaning that no vote or amendment will even be necessary to advance the provision in that chamber this year.
The Senate panel is scheduled to take up its version of the Treasury Department funding bill, which is called the Financial Services and General Government Appropriations Act, next week.
The Fraternal Order of Police, which opposes legalization, sent a letter this week urging House lawmakers to reject the cannabis banking move.
Letter to @USRepRodney & @NitaLowey advising them of our strong opposition to any amendment that would allow the marijuana industry full access to the American banking system. Drug cartels will be given the opportunity to launder money under the guise of marijuana normalization pic.twitter.com/y5a0gHPIUi
— National FOP (@GLFOP) June 12, 2018
While U.S. Attorney General Jeff Sessions in January rescinded Obama-era guidance that generally protected state marijuana laws from Justice Department interference, Treasury Department officials have for now kept in place a separate memo that provides some direction and limited protection to banks that work with cannabis businesses.
Also on Wednesday, Federal Reserve Chairman Jerome Powell was asked about cannabis banking issues during a press conference.
“This is a difficult area, because many state laws permit the use of marijuana and federal law still doesn’t,” he said. “So it puts federally chartered banks in a very difficult situation.”
The Fed chairman implied that he would like the issue to be resolved with a change in policy.
“It would great if that could be clarified,” Powell said. “Our mandate has nothing to do with marijuana, so we just would love to see it clarified.”
Another top Trump administration official, Treasury Sec. Steven Mnuchin, has indicated on a number of occasions that he sees the importance of allowing marijuana businesses to store their profits in banks.
“I assure you that we don’t want bags of cash,” he testified before a House committee in February. “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.”
Prior to his confirmation 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.”
President Trump himself last week indicated that he supports broader changes to federal marijuana prohibition so that states can set their own legalization laws without interference.
“I really do. I support Senator Gardner,” the president said when asked by a journalist if he supports the legislation, filed last week by Sens. Cory Gardner (R-CO) and Elizabeth Warren (D-MA).
The Treasury Department legislation, which also covers funding policy for the District of Columbia, contains provisions that prohibit the city from spending local or federal funds to enact a broader system of legal marijuana sales and from using federal monies to support supervised drug consumption facilities.
Meanwhile, separate standalone bills to permanently solve the marijuana industry’s financial services issues have record levels of support. House legislation filed by Rep. Ed Perlmutter (D-CO) has 94 cosponsors and a companion Senate bill sponsored by Sen. Jeff Merkley (D-OR) has 18 lawmakers signed on.
The marijuana banking amendment, as proposed before the House Appropriations Committee, reads:
“None of the funds made available in this Act may be used, with respect to the States of Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming, or with respect to the District of Columbia, Puerto Rico, or Guam, to penalize a financial institution solely because the institution provides financial services to an entity that is a manufacturer, producer, or a person that participates in any business or organized activity that involves handling marijuana or marijuana products and engages in such activity pursuant to a law established by a State or a unit of local government.”
The medical cannabis banking amendment reads:
“None of the funds made available by this Act may be used, with respect to the States of Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming, or with respect to the District of Columbia, Puerto Rico, or Guam, to penalize a financial institution solely because the institution provides financial services to an entity that is a manufacturer, producer, or a person that participates in any business or organized activity that involves handling medical marijuana or medical marijuana products and engages in such activity pursuant to a law established by a State or a unit of local government as it pertains to medical marijuana. Any entity that engages in any activity involving marijuana that is not exclusively for medical purposes shall not be covered by this provision.”
Square Quietly Launches Program For CBD Cannabis Company Credit Card Processing
Companies that sell cannabis products—even those consisting of CBD derived from hemp, which was legalized in the U.S. through the Farm Bill late last year—are continuing to have trouble accessing basic financial services that are available to businesses in other sectors. That includes being able to maintain bank accounts and process their customers’ credit cards.
The latter problem could be solved under a new pilot program that has quietly been launched by the payment processing service Square.
(Marijuana Moment’s editor provides some content to Forbes via a temporary exclusive publishing license arrangement.)
Facebook Uses Marijuana And Broccoli To Show Off Its AI Tech
Marijuana buds and tempura broccoli can look oddly similar out of context, but Facebook’s artificial intelligence (AI) technology can tell the difference.
At its annual developers conference on Wednesday, Facebook CTO Mike Schroepfer discussed how the social media giant is able to leverage visual AI to spot “policy-violating content,” including advertisements to sell cannabis on the platform. He explained the process by comparing images of the fried vegetable next to marijuana buds, which he described as the “most benign possible example” of prohibited content he could find.
— Queenie Wong (@QWongSJ) May 1, 2019
Five years ago, the company relied on “behavioral signals” to catch people advertising cannabis—things like whether the advertiser has been “caught for doing bad stuff before” or whether they used “obvious words” like “marijuana” or “drugs” in the post. But as AI advanced, Facebook developed a system that could visually distinguish cannabis from other miscellaneous items.
To drive the point home, Schroepfer put both images on the screen and challenged the audience to differentiate them.
— Tom Simonite (@tsimonite) May 1, 2019
A few people thought the tempura broccoli was marijuana, but most seemed to get it right. The visual algorithm was 94 percent sure that the marijuana was, in fact, marijuana, and 88 percent sure that the other image was the broccoli.
— john colucci (@johncolucci) May 1, 2019
For Facebook, the technology offers a convenient way to streamline its policy enforcement efforts. But for many cannabis reform groups and media companies that run Facebook accounts, the presentation is a window into an ongoing frustration.
The ban on content promoting the sale of federally illicit drugs has had collateral consequences for pages that post noncommercial marijuana material such as news outlets like Marijuana Moment and state regulatory bodies like the Massachusetts Cannabis Control Commission. These pages have at times been hidden from search results (a technique referred to as “shadowbanning”) because the algorithm isn’t able to accurately differentiate commercial advertisements from cannabis-related news articles, for example.
Marijuana influencers and state-legal cannabis businesses have long complained about having their accounts on the Facebook-owned Instagram platform temporarily disabled or permanently blocked for depicting cannabis or advertising their services.
A policy change may be on the horizon, as the company said in March that it wants “to consider whether we can loosen this restriction, especially in relation to medical marijuana, legal marijuana and brick and mortar stores.” But for the time being, Facebook will continue to enforce the policy, and it hasn’t provided a status update on that front at the conference so far.
“It’s against our policies because it’s against U.S. federal law, so you can’t advertise marijuana on Facebook,” Schroepfer said.
Photo courtesy of Facebook.
FDA Sends Warnings To Three Companies Selling CBD Products
At the same time that the Food and Drug Administration (FDA) is working to create a regulatory framework for hemp-derived CBD, it’s also cracking down on companies that are in its view irresponsibly marketing CBD products and making unsanctioned claims about their medical benefits.
FDA announced on Tuesday that it and the Federal Trade Commission sent warning letters to three such companies last month: PotNetwork Holdings in Florida, Nutra Pure in Washington state and Advanced Spine and Pain in New Jersey. The letters were sent “in response to their making unsubstantiated claims related to more than a dozen different products and spanning multiple product webpages, online stores and social media websites,” FDA Commissioner Scott Gottlieb said in a press release.
In a Twitter thread, the commissioner added that he was “concerned to hear recently that several national pharmacy chains and other major retailers have begun to sell or will soon begin to sell” CBD products and that the agency will “be contacting them to remind them of #FDA obligations and our commitment to protect consumers against products that can put them at risk.”
CVS and Walgreens both recently announced they will begin selling CBD-infused products.
We’ll be contacting them to remind them of #FDA obligations and our commitment to protect consumers against products that can put them at risk.
— Scott Gottlieb, M.D. (@SGottliebFDA) April 2, 2019
In the press release about the warning letters his agency has already sent to CBD companies, Gottlieb asserted that they used their websites to “make unfounded, egregious claims about their products’ ability to limit, treat or cure cancer, neurodegenerative conditions, autoimmune diseases, opioid use disorder, and other serious diseases, without sufficient evidence and the legally required FDA approval.”
At the same time, the warning letters announced today make clear that #FDA has and will continue to monitor the marketplace and use our authorities to take action against companies illegally selling these types of products when they are putting consumers at risk
— Scott Gottlieb, M.D. (@SGottliebFDA) April 2, 2019
FDA is hustling to provide manufacturers guidelines on marketing cannabidiol following the federal legalization of hemp last last year, but the process is complicated by the fact that CBD is the active ingredient in an FDA-approved drug, Epidiolex, and remains the subject of intensive clinical testing. Gottlieb has indicated that it will take years to develop a regulatory plan for CBD without further congressional action.
In the meantime, companies that continue to choose to engage in CBD commerce should be wary about making health claims about their products. The commissioner said FDA has “limited resources” for enforcement operations, but it would take action against companies that make “over-the-line” statements.
In the press announcement, FDA listed some of the unauthorized claims that the three companies made. For example, the products were touted as being able to treat cervical cancer, Alzheimer’s disease and substance use disorder.
“I believe these are egregious, over-the-line claims and we won’t tolerate this kind of deceptive marketing to vulnerable patients,” Gottlieb said. “The FDA continues to be concerned about the proliferation of egregious medical claims being made about products asserting to contain CBD that haven’t been approved by the FDA, such as the products and companies receiving warning letters today.”
“Selling unapproved products with unsubstantiated therapeutic claims can put patients and consumers at risk,” he said. “These products have not been shown to be safe or effective, and deceptive marketing of unproven treatments may keep some patients from accessing appropriate, recognized therapies to treat serious and even fatal diseases.”
Questions about what constitutes an unauthorized claim that would put a company at risk of enforcement action will likely come up at the agency’s just-announced public hearing CBD issues on May 31. Stakeholders are invited to submit information about the public safety impacts of CBD and how to manufacture and market products that contain the cannabis compound.
This piece was updated to include Gottlieb’s tweets about national pharmacy chains.
Photo courtesy of Nicholas C. Morton.