Marijuana business owners and those working closely with the growing cannabis economy were on Capitol Hill last week, asking for the same access to financial services as any other business in America.
Their testimony was submitted for a meeting of a subcommittee of the U.S. House Committee on Financial Services, during which lawmakers heard statements on the difficulties of opening and maintaining bank accounts for marijuana-related businesses.
Due to the marijuana’s current status as a Schedule I drug under the Controlled Substances Act, many banks, which are federally insured and regulated, avoid providing services to businesses in or operating adjacent to the cannabis market. Regardless of what state law says, in the eyes of the federal government, funds deposited from cannabis businesses can be considered money laundering and are subject to enforcement action—even if no such actions have yet been carried out against the small but growing number of financial institutions that are willing to work with the marijuana industry.
In nearly 100 separate pieces of written testimony compiled by the National Cannabis Industry Association, marijuana business owners from states including California, Utah, Washington, Tennessee, Michigan and Maryland talked about the hurdles placed in their path by not having a place to store their money.
Leah Heise of 4Front Ventures told lawmakers that not only has the current federal prohibition caused problems for her business, but the she also “had my personal bank account shut down just for being employed by a cannabis company.”
Another statement came from Stephen Madigan, the senior vice president of Kidder Matthews, a real estate firm with offices on the west coast. Madigan has 20 years of experience as a real estate broker in southern California and, over the past two years, has represented landlords, tenants, buyers and sellers in cannabis-related commercial real estate. He described the roughly $50 million in transactions he’s been associated with as “a small piece of the larger Orange County/LA market” and said that the lack of banking is “the single biggest hurdle to growth, second only to the removal of cannabis as a Schedule I drug.”
Madigan said businesses looking for real estate to house their cannabis operations are unable to provide credit or banking history and are treated as high credit risks. As a result, many must provide hundreds of thousands of dollars in security deposits and prepaid rent. Since they are not entitled to the same loans as other peer industries, they are limited to taking loans with interest rates at nine to 15 percent, due in as little as three years.
“This is one step above predatory lending terms,” he said.
Victoria W. of Materia Medica Laboratories, Inc. described the rude awakening she experienced in moving from food safety testing into cannabis testing.
“I did not expect that we would have such a hard time simply opening a checking account in order to do basic things like paying vendors and receiving payments from customers,” she wrote. “In food testing there is no way we could have told our customers that we strongly prefer cash over check or card, but that’s what many cannabis labs have to do.”
Many of the complaints from other cannabis businesses that submitted testimony centered on feelings of physical insecurity at hauling around large quantities of cash to pay bills, employees or taxes.
“Our drivers deliver product and can collect as much as $80,000 in a day,” wrote Metrik Feurtado, the chief financial officer of Big Pete’s Treats, a brand of THC-infused cookies based in Santa Cruz, California. “We do not have an armored delivery van so our drivers face significant risk from criminals who may find them an easy target. Banking would allow our drivers to deliver product and not touch cash. Safe banking is common sense.”
Other testimony came from law firms that don’t sell marijuana—or “touch the plant,” in industry parlance—but have had their bank accounts closed simply because they represent clients who do.
The statements were part of broader discussion at the hearing about the Secure and Fair Enforcement (SAFE) Banking Act of 2019, a draft bill that Rep. Ed Perlmutter (D-CO) plans to file soon. He and bipartisan group of lawmakers introduced a version of the legislation last year that generated a long list of cosponsors but didn’t receive a vote.
According to the draft’s text, federal regulators would be prohibited from punishing banks for providing services to a cannabis business or from discouraging financial institutions from working with marijuana industry clients.
Advocates are optimistic about the legislation’s chances under the new Democratic House majority, though it’s unclear what its prospects are in the Republican-controlled Senate.
Missouri Launches Medical Marijuana Sales At State’s First Dispensaries
Less than two years after Missouri voters approved a ballot measure to legalize medical marijuana, dispensaries made the state’s first cannabis sales to patients on Saturday.
N’Bliss Cannabis opened the doors of two separate St. Louis County locations, in Ellisville and Manchester.
I was honored to watch Larry, a cancer survivor, and his wife Sue, an RN, make the state’s first legal medical cannabis purchase this morning in St Louis. @mocanntrade @NewApproachMO pic.twitter.com/rCudrkdbfI
— Jack Cardetti (@jackcardetti) October 17, 2020
“Missouri patients have always been our north star as we work to implement the state’s medical marijuana program,” Dr. Randall Williams, director of the Missouri Department of Health and Senior Services, said in a press release. “We greatly appreciate how hard everyone has worked so that patients can begin accessing a safe and well-regulated program.”
Officials have touted the speed with which they have gotten the voter-approved cannabis program off the ground, saying it is “one of the fastest implementations of a medical marijuana program in the United States.”
“A tremendous amount of work has occurred by the licensed facilities and our team to get us to this point, and we continue to hear from more facilities that they are ready or almost ready for their commencement inspection,” Lyndall Fraker, director of the Section for Medical Marijuana Regulation, said in a press release. “We look forward to seeing these facilities open their doors to serve patients and caregivers.”
— Mo Health & Sr Srvcs (@HealthyLivingMo) October 17, 2020
The impending launch of sales on Saturday was first announced by the Missouri Medical Cannabis Trade Association on Friday and reported by The Springfield News-Leader.
The wait is finally over! Tomorrow morning at 9am @NBlissCannabis will open the doors to their Ellisville and Manchester locations for the first medical marijuana sales in Missouri! Congrats to the whole N'Bliss team! The #MOMMJ industry is up and running! pic.twitter.com/wyZIcoyLBv
— MoCannTrade (@mocanntrade) October 16, 2020
The state, which has so far licensed 192 dispensaries and expects most of them to open their doors by the end of the year, posted an interactive map that tracks the status of approved medical marijuana businesses.
For months, regulators have been caught up in lawsuits and appeals challenging their licensing decisions, with revenues that would otherwise go to supporting veteran services instead being allocated to covering legal costs.
Missouri isn’t the only state to see medical cannabis sales launch this weekend. Virginia’s first medical marijuana dispensary also held its grand opening on Saturday.
Meanwhile, recreational sales of marijuana rolled out in Maine last week—four years after voters there approved a legalization ballot measure.
Illinois Continues Record-Breaking Marijuana Sales Streak, New State Data For September Shows
For the fifth month in a row, Illinois is again reporting record-breaking marijuana sales, the state Department of Financial and Professional Regulation announced on Monday.
Despite the coronavirus pandemic, Illinois has seen escalating cannabis sales month-over-month. In September, consumers purchased more than 1.4 million marijuana products worth a total of nearly $67 million. Almost $18 million of those sales came from out-of-state visitors.
In August, the total sales reached about $64 million—the previous monthly record. The new adult-use sales figures don’t include data about purchases made through the state’s medical cannabis program.
This latest data seems to support the notion that the state’s marijuana market is “recession-proof” and “pandemic-proof,” as a top regulator said in August.
State officials have emphasized that while the strong sales trend is positive economic news, they’re primarily interested in using tax revenue to reinvest in communities most impacted by the drug war. Illinois brought in $52 million in cannabis tax revenue in the first six months since retail sales started in January, the state announced in July, 25 percent of which will go toward a social equity program.
“We were not doing this to make as much money as fast as we possibly could,” Toi Hutchinson, senior cannabis advisor to Gov. J.B Pritzker (D), said. “We were actually doing this for people,” with a focus on supporting communities most impacted by the drug war.
In May, the state also announced that it was making available $31.5 million in restorative justice grants funded by marijuana tax revenue.
That said, ensuring an equitable market as promised hasn’t been easy. Regulators have recently faced lawsuits after dozens of would-be social equity licensees were denied an opportunity to participate in a licensing lottery over alleged problems with their applications. The state said it would approve 75, but only 21 ultimately qualified—and critics complain that the resources it takes to submit an acceptable application creates barriers for the exact people the special licenses are supposed to help.
The governor announced last month that new procedures would be implemented allowing rejected applicants to submit corrected forms. But on Monday, three investors who are finalists from the initial round filed a lawsuit against the state, alleging that the administration’s decision to permit resubmissions was politically motivated and illegal.
For now, the out-of-state sales data seems to support Pritzker’s prediction during his State of the State address in January that cannabis tourism would bolster the state’s coffers.
Prior to implementation, the pardoned more than 11,000 people with prior marijuana convictions.
Over in Oregon, officials have been witnessing a similar sales trend amid the global health crisis. Data released in August reveals that the state saw about $106 million in medical and recreational cannabis sales, marking the third month in a row that sales exceeded $100 million.
California Governor Approves Changes To Marijuana Banking And Labeling Laws
California Gov. Gavin Newsom (D) signed a handful of marijuana bills into law on Tuesday, making a series of small adjustments to the nation’s largest legal cannabis system. More sweeping proposals such as overhauling the state’s marijuana regulatory structure will have to wait until next year, the governor said.
Among the biggest of the new changes are revisions to banking and advertising laws. With many legal marijuana businesses are still unable to access financial services, Newsom signed a bill (AB 1525) to remove state penalties against banks that work with cannabis clients.
“This bill has the potential to increase the provisions of financial services to the legal cannabis industry,” Newsom wrote in a signing statement, “and for that reason, I support it.”
Democrats in Congress, meanwhile, have been working for months to remove obstacles to these businesses’ access to financial services at the federal level. A coronavirus relief bill released by House Democratic leaders on Monday is the latest piece of legislation to include marijuana banking protections. Past efforts to include such provisions have been scuttled by Senate Republicans.
In his signing statement on the banking bill, Newsom directed state cannabis regulators to establish rules meant to protect the privacy of marijuana businesses that seek financial services, urging that data be kept confidential and is used only “for the provision of financial services to support licensees.”
Another bill (SB 67) the governor signed on Tuesday will finally establish a cannabis appellation program, meant to indicate where marijuana is grown and how that might influence its character. The system is similar to how wine regions are regulated.
Under the new law, growers and processors under the new law will be forbidden from using the name of a city or other designated region in product marketing unless all of that product’s cannabis is grown in that region. Similar protections already apply at the county level.
For outdoor growers, the new law recognizes the importance of terrior—the unique combination of soil, sun and other environmental factors that can influence the character of a cannabis plant. For indoor growers, it provides a way to represent a hometown or cash in on regional cachet.
Most of the other new changes that the governor signed into law are relatively minor and will likely go unnoticed by consumers. One, for example, builds in more wiggle room on the amount of THC in edibles (AB 1458), while another would allow state-licensed cannabis testing labs to provide services to law enforcement (SB 1244).
The bills were approved by state lawmakers earlier this month, as the state’s legislative session drew to a close.
Other pieces of cannabis legislation passed by the legislature this session were met with the governor’s veto. On Tuesday, Newsom rejected a proposal (AB 1470) that would have allowed processors to submit unpackaged products to testing labs, which industry lobbyists said would reduce costs. Currently products must be submitted in their final form, complete with retail packaging. Newsom said the proposal “conflicts with current regulations…that prevent contaminated and unsafe products from entering the retail market.”
“While I support reducing packaging waste, allowing products to be tested not in their final form could result in consumer harm and have a disproportionate impact on small operators,” Newsom said in a veto statement.
Those changes to testing procedures should instead be considered next year, Newsom said, as part of a pending plan to streamline California’s cannabis licensing and regulatory agencies.
“I have directed my administration to consolidate the state regulatory agencies that currently enforce cannabis health and safety standards to pursue all appropriate measures to ease costs and reduce unnecessary packaging,” he wrote. “This proposal should be considered as part of that process.”
Newsom also last week vetoed a bill (AB 545) that would have begun to dissolve the state Bureau of Cannabis Control, which oversees the legal industry. In a statement, the governor called that legislation “premature” given his plans for broader reform.
“My Administration has proposed consolidating the regulatory authority currently divided between three state entities into one single department,” Newsom wrote, “which we hope to achieve next year in partnership with the Legislature.”
Earlier this month, the governor signed into law one of the industry’s top priorities for the year—a measure (AB 1872) that freezes state cannabis cultivation and excise taxes for the entirety of 2021. The law is intended to provide financial stability for cannabis businesses in California, where taxes on marijuana are among the highest in the nation.
The state’s leading marijuana trade group, the California Cannabis Industry Association (CCIA), applauded the governor’s moves. All the bills approved by Newsom this week had the industry group’s support.
“We thank Governor Newsom for prioritizing these bills, which seek to reduce regulatory burdens, improve enforcement, expand financial services and enhance the state’s cannabis appellation’s program,” CCIA Executive Director Lindsay Robinson said in a message to supporters on Wednesday. “Like so many, the cannabis industry has faced a series of unexpected challenges and setbacks in 2020. We look forward to continuing to work with the Newsom Administration, and the Legislature, as we pursue a robust policy agenda in 2021.”
Image element courtesy of Gage Skidmore