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Supporters then scrambled to craft a more limited measure focused on medical cannabis businesses, but it was ultimately withdrawn before a vote could take place.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.”
Trump Treasury Official Wants Congress To Fix Marijuana Businesses’ Banking Issues
Congress needs to come up with a solution for banking access by the marijuana industry, a top federal Treasury Department official said on Wednesday. And he hopes that will happen by 2020, if not sooner.
Joseph Otting, the comptroller of the currency, told reporters that lawmakers “have to act at the national level to legalize marijuana if they want those entities involved in that business to utilize the U.S. banking system,” according to PoliticoPro.
— POLITICO Pro (@POLITICOPro) January 16, 2019
Cannabis businesses acting in compliance with state law face uncertainty when dealing with federally regulated financial institutions. And banks potentially risk being penalized for servicing those businesses, leading many to avoid the industry altogether.
That said, a steadily growing number of banks are operating accounts for cannabis companies anyway, federal data shows.
“If I’m a betting person, I’m like 25-30 percent maybe next year, but I would hope by 2020 we can get this issue resolved,” said Otting, who was also recently assigned to double duty as acting director of the Federal Housing Finance Agency.
He previously called the existing situation “generally not healthy,” echoing comments made by Federal Reserve Chairman Jerome Powell, who said “it would be great if [the banking issue] could be clarified.”
Similarly, Treasury Secretary Steven Mnuchin has described the banking conflict as untenable. He said last year that his department was “reviewing the existing guidance,” referring to a 2014 Obama-era policy memo meant to provide direction for banks on how to service marijuana businesses.
“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,” he said.
Sen. Chuck Schumer Welcomes Major Cannabis Company To New York’s Hemp Industry
Canadian marijuana giant Canopy Growth Corporation will enter the nascent U.S. hemp industry by building a massive farming and production center in southern New York, U.S. Senate Minority Leader Chuck Schumer (D-NY) announced on Monday.
Canopy has yet to finalize its plans for an exact location—a contract could be signed as soon as Monday, Schumer said—but the company could eventually support “up to 400 jobs” in hemp cultivation, processing and product manufacturing at what would be a “first of its kind” center for the just-legalized U.S. hemp industry, the senator said.
Once a key American crop—George Washington famously grew hemp at Mount Vernon, and there was a stand of hemp plants in northern Virginia where the Pentagon now stands—the U.S. now lags far behind other countries in hemp production, a result of the country’s broad outlawing of cannabis decades ago.
Eventually, Canopy plans to invest “between $100-$150 million” into a New York State-based industrial hemp farm, Schumer said, with other companies potentially drawn to the sector by such a prominent anchor business.
“Hemp is a very valuable product and a burgeoning crop here” in southern New York, said Schumer, offering a very brief remedial education in the plant for those present at a press conference he convened. “I’m not kidding when I say this, but hemp is everywhere.”
“This is going to be a major shot in the arm” for the area, he added.
“Hemp” is more of a legal than a botanical distinction. Under U.S. law, cannabis sativa with 0.3 percent or more THC is considered “marijuana” and falls under federal drug-control laws. Cannabis with less than 0.3 percent THC is considered industrial hemp.
Hemp has been legal to import and process, but until very recently, hemp cultivation was mostly illegal in the U.S.
That prohibition that ended when President Donald Trump signed the 2018 Farm Bill into law last month. The previous 2014 version of the Farm Bill created a pilot program for states that wished to legalize small-scale hemp cultivation as part of research programs.
Based on that success and on growing support for an end to cannabis prohibition nationwide, the 2018 Farm Bill legalized cultivation of hemp outright. Almost immediately, politicians began touting the crop’s potential as a miracle product and an economic boon with enthusiasm once reserved only for acolytes of hemp evangelist Jack Herer.
Senate Majority Leader Mitch McConnell, who championed the hemp legalization provisions, signed off on the final version of the Farm Bill with a hemp pen—but for now, Schumer, his Democratic counterpart, may have stolen the top Republican’s fire.
“I’ve always believed that states should be the laboratories of democracy,” he said. “I’ve been very eager to have the hemp industry grow in New York and the Southern Tier.”
Photo courtesy of Senate Democrats.
Alcohol Sales Aren’t Impacted By Marijuana Legalization, Trade Association Finds
Marijuana legalization hasn’t hurt alcohol sales in the years since legal markets were established in Colorado, Washington State and Oregon, according to a new study from an alcohol trade association.
The Distilled Spirits Council looked at alcohol tax and shipment data before and after legalization to determine whether cannabis reform impacted sales of spirits, beer or wine in legal states.
“Simply put, the data show there has been no impact on spirits sales from recreational marijuana legalization,” the council’s chief economist, David Ozgo, said in a press release on Thursday.
“We now have four years of retail recreational marijuana sales history in Colorado and Washington state, and three years in Oregon, and each of these markets remain robust for spirits sales,” he said. “We did this study because there is a lot of misinformation circulating about the impact of recreational marijuana legalization on distilled spirits and the wider alcohol market.”
Per capita spirits sales actually increased slightly in post-legalization years, which was consistent with national trends. Sales were up 7.6 percent in Colorado, 5.4 percent in Washington and 3.6 percent in Oregon.
The trade association also analyzed beer and wine sales during the same period. For beer, sales were down marginally, with drops of 3.6 percent in Colorado, 2.3 percent in Washington and 3.6 in Oregon. But again, that’s consistent with national trends, according to the study.
Wine sales were mixed across the three states: Up 3.2 percent in Colorado, down 3.1 percent in Washington and up .7 percent in Oregon.
The Distilled Spirits Council also used their analysis as an opportunity to plug their policy recommendations to lawmakers in states considering marijuana legalization. While the association has declined to take a position on whether to legalize, it shared a list of recommendations ranging from equitable taxes on cannabis and alcohol to THC content disclosure requirements.
There is at least one major alcohol group that is willing to support states’ right to legalize, though. The Wine & Spirits Wholesalers of America (WSWA) called for the end of federal marijuana prohibition last year and, in December, went so far as to host a briefing on cannabis policy for lawmakers and congressional staffers.
Reform advocates have questioned whether legal access to marijuana would adversely impact alcohol sales, with more people opting to consume cannabis over booze. There is some research that indicates the alcohol industry is being interrupted in medical marijuana states, but more data is needed.
Photo courtesy of Pixabay.