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Marijuana Businesses Plea For Congress To Provide Banking Access

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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.

Key Moments From The First Marijuana Hearing Of The New Congress

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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.

GOP Senator Who Trashed Marijuana Banking Amendment Years Ago Is Now Cosponsoring Reform Bill

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Colorado Sold More Than Half A Billion Dollars In Legal Marijuana In 2021’s First Three Months

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More than $10.5 billion in cannabis has been sold in Colorado since it was legalized in 2014. Those sales translate into over $1.7 billion in tax revenue that goes towards public schools, infrastructure projects and local government programs.

By Robert Davis, The Center Square

Colorado’s marijuana sales eclipsed the half-billion dollar mark in the first quarter of 2021, the state Department of Revenue (DOR) said on Tuesday.

In all, marijuana sales were over $560 million between January and March. More than $10.5 billion in marijuana has been sold in Colorado since it was legalized in 2014.

Those sales translate into over $1.7 billion in tax revenue that goes towards public schools, infrastructure projects and local government programs.

DOR compiles its monthly marijuana sales report by adding the state’s medical and recreational sales together. The total does not include marijuana accessories or any products that do not contain medical marijuana.

Marijuana sales reached $207 million in the month of March alone. In exchange, the state collected $39.6 million in taxes.

Marijuana tax revenue is collected through three state taxes: a 2.9 percent sales tax on marijuana sold in stores, a 15 percent tax on retail marijuana and a 15 percent retail marijuana excise tax.

State law requires 71 percent of the total to be remitted to the marijuana tax cash fund, a budget account that is statutorily required to fund health care, health education, substance abuse prevention and treatment programs and law enforcement.

The remaining 29 percent is then subdivided between the state public school fund and the general fund. Schools receive just over 12 percent of the total while the general fund receives greater than 15 percent.

In April, the public school fund received over $14 million. The account supports school construction projects and is controlled by the School Board Investment Fund, a three-member panel responsible for maintaining the fund’s capital that was established in 2016.

Meanwhile, the marijuana tax cash fund received over $16 million and the general fund received $3.5 million.

This story was first published by The Center Square.

Congressional Bill To Federally Legalize Marijuana Filed By Republican Lawmakers

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Missouri Medical Marijuana Business Ownership Info Would Be Disclosed Under House-Approved Amendment

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The state isn’t supposed to issue more than five dispensary licenses to any entity under substantially common control, ownership or management—but an analysis found instances where a single entity was connected to more than five licenses.

By Jason Hancock, Missouri Independent

The Missouri House voted Tuesday afternoon to require state regulators to turn over ownership information for businesses granted medical marijuana licenses to legislative oversight committees.

The amendment, which was approved 82-59, was sponsored by Rep. Peter Merideth, D-St. Louis. He said the Department of Health and Senior Service’s decision to deem ownership records confidential has caused problems in providing oversight of the program.

Tuesday’s vote came a day after analysis by The Independent and the Missourian of the 192 dispensary licenses issued by the state found several instances where a single entity was connected to more than five dispensary licenses.

According to the constitution, the state can’t issue more than five dispensary licenses to any entity under substantially common control, ownership or management.

But because DHSS has steadfastly withheld any ownership information about license holders from public disclosure, it’s impossible to determine who owns what.

The situation has bred suspicion, especially in light of more than a year of scrutiny by state lawmakers 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.

“We’ve asked the department: ‘Are there any entities that have complex ownership structures so that someone that owns one license actually owns or has a controlling interest in a whole bunch of others?’” Merideth said. “The department said, ‘nope.’ We asked for records to confirm that, and the department said, ‘nope.’”

He has no reason to trust the department, Merideth said, “based on how this program has been managed so far,” adding later that DHSS is in “dire need of accountability and transparency.”

His amendment would not require DHSS to make ownership information publicly available. The department would only be required to turn records over to legislative committees upon request.

Joining him in support of the amendment was Republican Rep. Jered Taylor of Republic, who is chairman of the special committee on government oversight.

“The department should be disclosing this information,” he said, saying he’d actually support going further and making the information publicly available.

Taylor later added: “If we want to do our jobs correctly, we have to have the information.”

DHSS justifies withholding the 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… .”

Rep. Shamed Dogan, R-Ballwin, said DHSS is asking lawmakers and the public to trust that they are enforcing limits on license ownership.

“When I as a Republican I hear ‘trust us’ from the government,” he said, “I usually say no. Trust but verify.”

Merideth’s amendment was added to a Senate bill pertaining to nonprofit organizations. The legislation now heads back to the Senate, where it can either vote to send it to the governor or request a conference committee to work out differences with the House.

This story was first published by Missouri Independent.

Louisiana House Approves Marijuana Decriminalization Bill As Other Reforms Advance

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