Marijuana Businesses Plea For Congress To Provide Banking Access
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.
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