A key Senate committee met on Tuesday to discuss legislative fixes that would allow banks to service state-legal marijuana businesses without the risk of being penalized by federal financial regulators, and the chair of the panel concluded that “a case has been made pretty strongly here” that the issue must get resolved but that it’s a “very important and complex issue that we need to get right.”
The Senate Banking, Housing and Urban Affairs Committee, chaired by Sen. Mike Crapo (R-ID), announced the hearing last week, which took some advocates by surprise given the senator’s previous statement that he wouldn’t commit to examining the cannabis financial services issue while the federal government still regarded marijuana as a controlled substance.
A bipartisan bill—the Secure And Fair Enforcement (SAFE) Banking Act—was a main focus of the conversation. The House version of the legislation cleared that chamber’s Financial Services Committee in March, and while advocates hoped it would go before the full chamber ahead of the August recess, expectations have shifted toward the fall for floor action.
When a Marijuana Moment reporter asked Crapo after the hearing if he’s spoken to Senate Majority Leader Mitch McConnell (R-KY) about the bill, the chairman replied that he’s “spoken to almost all of our colleagues about this.”
In response to questions from other reporters about next steps, he said that the committee is “trying right now to see if we can find a way to address the various issues” ahead of a potential markup on the cannabis banking legislation and that he doesn’t “intend to hold additional hearings on the issue.”
Sen. Sherrod Brown (D-OH), ranking member of the panel, said in his opening remarks at the hearing that “the legal cannabis industry is one of the fastest growing in the United States and employs hundreds of thousands of people.”
“No matter how you feel about marijuana itself, we have a duty to look about for the workers who work in this industry and the communities they represent,” he said.
Witnesses who testified before the Senate committee included SAFE Banking Act sponsors Sens. Cory Gardner (R-CO) and Jeff Merkley (D-OR), Credit Union National Association (CUNA) representative Rachel Pross, American Bankers Association (ABA) representative Joanne Sherwood, Smart Approaches To Marijuana (SAM) Vice President of Government Affairs Garth Van Meter and LivWell Enlightened Health CEO John Lord.
Watch the Senate’s marijuana banking hearing below:
Advocates argue that providing banking access to cannabis businesses will increase financial transparency and mitigate safety risks, since such companies are currently largely forced to operate on a cash basis that makes them targets of crime.
Gardner said in his testimony that “the states are leading on this issue, and the federal government has failed to respond. It has closed its eyes and plugged its ears and pretended the issue will go away. It won’t.”
“Keeping those dollars out of banks means we lose the ability to trace where the dollars go,” he added. “It also makes it harder to ensure all taxes are being paid. It makes it easier for criminals in the illicit market to pose as legitimate. And it leaves hundreds of millions of dollars of cash in the state.”
He recognized during the hearing that this “is a difficult hearing, a difficult topic. I know that.”
“But we were sent here to deal with the difficult topics,” he said. “It’s an important step forward. First hearing we’ve had on this issue as the federal government wakes up to the reality that the cannabis issue is not going to go away and we must have action.”
Following the hearing, Gardner told reporters that he was confident that there’s enough support in the Senate to pass not only the SAFE Banking Act but also another bipartisan bill he is cosponsoring to allow states to set their own cannabis policies without the risk of federal interference.
“[I]t would pass with majority support and I think it would have a majority of Republicans voting for it as well,” he said.
Notably, the senator told Marijuana Moment that he speaks to McConnell “constantly” about cannabis issues, as recently as Monday.
“If they want me to shut up then they can just pass this and the STATES Act and that’s the way I’ll shut up,” he said, referring to the banking and broader states’ rights bills.
But GOP attendance at the meeting was lacking overall, with only Crapo and Gardner appearing from the majority, raising questions about the extent to which Senate Republicans are interested in advancing cannabis banking legislation.
Merkley said in his testimony that the “lack of availability of financial services for cannabis-related businesses in states where it is legalized has created a scenario where businesses are forced to operate in all cash, leading to unsafe environments for all parties involved.”
“Financial institutions support legal clarity and certainty and a legislative hearing would provide an opportunity to address outstanding questions and ensure a better understanding of the proposed bipartisan legislation,” he said, adding that he hopes the hearing “will give members the opportunity to hear directly from witnesses who have direct experience with the challenges facing the financial sector, the cannabis industry, and law enforcement.”
During the hearing, Merkley said there’s “nothing good about forcing the world to operate on cash.”
“It is an invitation to money laundering. It is an invitation to organized crime. It is an invitation to robbery. It is an invitation to cheat on your taxes or cheat your employees,” he said. “Let’s fix this. Let’s honor the states’ rights vision of all of the states that have said this makes sense here in our location for our citizens.”
“Although the SAFE Banking Act does not cure all of the cannabis-related banking challenges, it would help the 33 states that have legalized cannabis in some form to make their communities safer, collect their taxes, and regulate their cannabis markets effectively,” Sherwood, who is president and CEO of Citywide Banks, said in written testimony on behalf of ABA. “It would also help banks and their customers in states without legal cannabis regimes by addressing the unintended consequences for unrelated businesses that provide products and services to the cannabis industry, their employees or service providers, without undermining each state’s ability to prohibit cannabis sales and use within their borders.”
The Oregon senator also introduced into the record more than 100 stories from people who have been affected by the lack of marijuana industry banking access.
Pross, chief risk officer for Maps Credit Union, said that her association does “not have a position on the federal legalization of cannabis” but that “many credit unions operate in states and communities that have made cannabis usage or growth legal for medicinal and/or recreational purposes” and that CUNA strongly believes that “financial institutions should be permitted to lawfully serve businesses that engage in activities that are authorized under their state laws, even when such activity may be inconsistent with federal law.”
“On behalf of America’s credit unions and their 115 million members, we urge both Congress and the Administration to work towards turning this legislation into the law and providing financial institutions with the certainty needed to better serve our communities.”
Prohibitionist group SAM’s Van Meter said that members of the committee were being tasked with addressing “whether we want to promote and increase drug use during an addiction crisis or discourage drug use and help people find recovery and healing” by debating whether to provide access to banking to cannabis businesses.
“By skipping ahead to a technicality over banking rules, the marijuana industry is hoping to gain many of the benefits of federal legalization without a debate over the public health effects,” he said in testimony.
Attached to SAM’s submission is a letter expressing concern about the potential consequences of passing the SAFE Banking Act, signed by former heads of the Drug Enforcement Administration and Office of National Drug Control Policy.
Sen. Brian Schatz (D-HI) spoke about research barriers for marijuana, noting that he cosponsored bipartisan legislation introduced last week that would address the issue alongside Sens. Chuck Grassley (R-IA) and Dianne Feinstein (D-CA).
Van Meter jumped in to say that “if the marijuana industry was concerned about research, then I don’t think they would be selling some of these extremely high potency” products.
“Well hang on, I’m concerned about research,” Schatz said. “I’m going to allow you to answer the questions, but I’m not going to allow you to take a pot shot at the people that you’re testifying with.”
Lord, who is chairman of the industry association Cannabis Trade Federation, said that “due to the significant compliance costs associated with serving cannabis customers under existing policies, financial institutions charge cannabis businesses substantial monthly fees.”
“Our company pays in excess of $3,000 per month for the mere privilege of having an account,” he said of LivWell Enlightened Health. “The current situation is especially challenging for small businesses. While we, due to our size, are able to absorb the additional costs associated with cash management and exorbitant bank fees, many small businesses are not.”
“Furthermore, resolving the banking issue could significantly aid cannabis businesses in securing business loans. This is critical to small business owners who may not have access to other sources of capital. It should be noted that these small businesses are also being squeezed by Section 280E of the Internal Revenue Code, which prevents all cannabis companies from deducting standard business expenses when they calculate their taxes. If there is any hope in helping small businesses – including minority—and women-owned companies—survive and thrive, we must fix the banking situation and amend Section 280E so that cannabis businesses are taxed like any other business.”
Sen. Bob Menendez (D-NJ) discussed challenges that cannabis businesses face in securing loans and touted separate legislation he introduced on Monday that would give such companies access to insurance.
Federal law prevents legal marijuana business owners from getting comprehensive and affordable insurance coverage.
Without it, they can’t protect their property, employees, or customers.
— Senator Bob Menendez (@SenatorMenendez) July 23, 2019
These small businesses also need to be able to open a bank account, pay employees, take out credit cards, & write checks.
The SAFE Banking Act is a game changer. It gives cannabis businesses access to basic banking services, making the industry safer and the future brighter. pic.twitter.com/wsgVwyu1YR
— Senator Bob Menendez (@SenatorMenendez) July 23, 2019
Sen. Tina Smith (D-MN) argued that federal marijuana reform should not stop at banking access.
“I think we need to realize that as we’re looking at criminal penalties for involvement of businesses with marijuana, we can’t forget the thousands of individuals who have spent time behind bars for their involvement with marijuana,” she said. “Communities of color, particularly African-American men, have paid a disproportionate price for generations of aggressive enforcement of marijuana laws.”
Brown, the ranking Democrat, made a similar point, saying that the financial services hearing is “just one piece of the conversation Congress must have on marijuana policy.”
“People should not be thrown in jail or have their futures jeopardized by a criminal record over non-violent marijuana offenses,” he said.
Other topics brought up during the meeting include the lack of access to financial services for hemp businesses since the crop was federally legalized under the 2018 Farm Bill, barriers to marijuana research and how providing banking access to the industry can help regulators better identify illicit financial activity.
Banking associations representing all 50 states have voiced support for the SAFE Act. Other advocates for a legislative resolution to the banking issue include a coalition of 20 bipartisan governors, the National Association of State Treasurers, top financial regulators in 25 statesand a majority of state attorneys general.
On the House side, the legislation has 206 cosponsors. The bill has 31 cosponsors in the Senate.
The banking hearing marks the sixth congressional hearing on marijuana policy this Congress, including a historic meeting of the House Judiciary Crime, Terrorism and Homeland Security Subcommittee on pathways to end the federal prohibition of cannabis. Another committee is scheduled to discuss hemp production on Wednesday.
Aaron Houston contributed reporting for this story from Washington, D.C.
Feds Send Warning Letter To Another CBD Company Over Medical Claims
The Food and Drug Administration (FDA) and Federal Trade Commission (FTC) sent a warning letter to a Florida-based CBD company on Tuesday, alleging that the business made several unsanctioned claims about the therapeutic benefits of their products.
The federal agencies accused Rooted Apothecary of unlawfully asserting that their cannabidiol products could treat symptoms of conditions such as ADHD, Parkinson’s disease, ear aches, ADHD and autism. Those claims appeared on the company’s website and social media accounts, they said.
Certain products appeared to be marketed as dietary supplements, which FDA currently prohibits as it works to develop an alternative regulatory scheme for CBD.
“Cannabis and cannabis-derived compounds are subject to the same laws and requirements as FDA-regulated products that contain any other substance,” Acting FDA Commissioner Ned Sharpless said in a press release. “We are working to protect Americans from companies marketing products with unsubstantiated claims that they prevent, diagnose, treat, or cure a number of diseases or conditions.”
FDA and FTC have issued a joint warning letter to a company marketing unapproved cannabidiol products with unsubstantiated claims to treat teething and ear pain in infants, autism, ADHD, Parkinson’s and Alzheimer’s disease, among other conditions/diseases. https://t.co/tsn4SBiGzH pic.twitter.com/sG3wyURMDS
— Dr. Ned Sharpless (@FDACommissioner) October 22, 2019
We’ve sent numerous warning letters that focus on matters of significant public health concern to CBD companies, and these actions should send a message to the broader market about complying with FDA requirements.
— Dr. Ned Sharpless (@FDACommissioner) October 22, 2019
“We’ve sent numerous warning letters that focus on matters of significant public health concern to CBD companies, and these actions should send a message to the broader market about complying with FDA requirements,” he said. “As we examine potential regulatory pathways for the lawful marketing of cannabis products, protecting and promoting public health through sound, science-based decision-making remains our top priority.”
FTC’s complaint with the company is that it violated a law that requires businesses that advertise medical claims about their products to have “competent and reliable scientific evidence” to back them up, which could include human clinical trials. Making or exaggerating such claims through “a product name, website name, metatags, or other means” without proper evidence is also prohibited.
FTC and @US_FDA warn Florida company marketing CBD products about claims related to treating autism, ADHD, Parkinson’s, Alzheimer’s, and other medical conditions: https://t.co/cAbxPPcxk8 pic.twitter.com/GdlttyBgxv
— FTC (@FTC) October 22, 2019
Rooted Apothecary must respond to the agencies within 15 working days to explain what steps it’s taking to resolve the issues. If the company fails to do so, it is subject to legal action, including the possible seizure of its products or an injunction. It may also have to compensate customers.
FDA emphasized that CBD products—other than the prescription medication Epidiolex, for the treatment of intractable epilepsy—are not currently allowed. But it also reiterated that the agency is in the process of developing rules that could allow for the lawful marketing of the compound.
In April, FDA sent warning letters to three other CBD companies that it said was making unauthorized claims about the medical benefits of their products. FTC also submitted warning letters to three separate CBD companies for allegedly advertising misleading statements about their products last month.
These letters are examples of the agency’s use of enforcement discretion. Former FDA Commissioner Scott Gottlieb, who recently suggested that the federal government should be involved in regulating state marijuana programs, clarified in March that the agency is only going after companies that make especially misleading claims about their products.
Senate Majority Leader Mitch McConnell (R-KY), who championed a provision of the 2018 Farm Bill federally legalizing hemp and its derivatives, has urged FDA to clear a path for the lawful marketing of CBD products by using enforcement discretion while it develops an interim final rule. A bipartisan group of lawmakers made a similar request in a letter sent to the agency last month.
“The FDA is working quickly to further clarify our regulatory approach for products containing cannabis and cannabis-derived compounds like CBD while using all available resources to monitor the marketplace and protect public health by taking action as needed against companies,” FDA Principal Deputy Commissioner Amy Abernethy said.
FDA’s working quickly to further clarify our regulatory approach for products with cannabis/cannabis-derivatives like CBD while using all available resources to monitor the marketplace & protect public health by taking action as needed against companies. https://t.co/HB9IhG2qud
— Dr. Amy Abernethy (@DrAbernethyFDA) October 22, 2019
We are committed to advancing our regulation of these products through an approach that, in line with our mission, prioritizes public health, fosters innovation and promotes consumer confidence. We plan to provide an update on our progress in this area in the near future.
— Dr. Amy Abernethy (@DrAbernethyFDA) October 22, 2019
“We recognize that there is significant public interest in cannabis and cannabis-derived compounds; however, we must work together to fill in the knowledge gaps about the science, safety and quality of many of these products,” she said. “We are committed to advancing our regulation of these products through an approach that, in line with our mission, prioritizes public health, fosters innovation and promotes consumer confidence.”
Photo courtesy of Kimzy Nanney.
GOP Senator Links Medical Marijuana Claims To Tobacco Industry Advertisements
Sen. John Cornyn (R-TX) said on Tuesday that claims about the therapeutic potential of marijuana remind him of decades-old tobacco industry advertisements asserting that the product had medical benefits.
In a speech on the Senate floor, Cornyn discussed a hearing that the International Narcotics Control Caucus, which he co-chairs, will hold on Wednesday to explore the public health impacts of cannabis. He said it was especially important to hear from experts about the subject as more states legalize marijuana and members of Congress, as well as Democratic presidential candidates, push to end federal prohibition.
Senate Hearing To Focus On Marijuana And Health This Week – https://t.co/aPZczm3X75
— Senator John Cornyn (@JohnCornyn) October 21, 2019
The senator made clear he’s skeptical about marijuana’s health benefits.
“There’s no shortage of people who claim that marijuana has endless health benefits and can help patients struggling from everything from epilepsy to anxiety to cancer treatments,” he said. “This reminds me of some of the advertising we saw from the tobacco industry years ago where they actually claimed public health benefits from smoking tobacco, which we know as a matter of fact were false and that tobacco contains nicotine, an addictive drug, and is implicated with cancers of different kinds.”
“We’re hearing a lot of the same happy talk with regard to marijuana and none of the facts that we need to understand about the public health impact of marijuana use,” he said.
While Cornyn recognized there’s significant support for cannabis reform, he said that ” for the number of voices in support of legalization, there are even more unanswered questions about both the short- and long-term public health effects.”
He expressed concern about increased levels of THC concentration in cannabis products and stated that it’s “true that for some people that marijuana can indeed be addictive.”
“There’s simply a lack of scientific evidence to determine the link between marijuana and various health risks, and that’s something I would think Congress and the American people would want to know before we proceed further down this path,” Cornyn said. “We don’t know enough about how this could impair cognitive function or capacity or increase the risk of mental illness or perhaps serve as a gateway for other drugs that are even more damaging to the health of a young person.”
The senator made similar remarks during a conversation with a former White House drug czar in August. He said it was important to address the public health impacts of cannabis before moving forward with legislation that would protect banks that service marijuana businesses from being penalized by federal regulators.
“With increasing use and a growing number of states giving the green light for marijuana use, we need better answers,” he said.
The surgeon general and the director of the National Institute on Drug Abuse, along with several academics, are scheduled to testify at Wednesday’s hearing.
Photo courtesy of C-SPAN.
Michael J. Fox Parkinson’s Foundation Urges Congress To Pass Three Marijuana Research Bills
A leading advocacy group that’s dedicated to finding treatment options for Parkinson’s disease is backing three pieces of marijuana research legislation in Congress.
The Michael J. Fox Foundation (MJFF)—named after the actor, who has Parkinson’s and established the nonprofit—said last week that lifting barriers to cannabis research, including rescheduling the plant under the Controlled Substances Act (CSA), is necessary to promote studies verifying marijuana’s potential therapeutic benefit for conditions such as Parkinson’s patients.
“The MJFF supports increased access to cannabis for medical research. Congress has begun to recognize this need, and there are several bills in the U.S. House and Senate designed to remove barriers that impede safe and legal access to cannabis by medical researchers,” the foundation said on its website. “The MJFF public policy team is tracking these bills and working to educate members of Congress and their staff on their importance to the Parkinson’s community.”
MJFF said it’s in favor of three marijuana bills, which would accomplish the following:
—Require the Justice Department to approve additional manufacturers for research-grade cannabis.
—Protect research institutions that conduct studies on marijuana.
—Authorize the U.S. Department of Veterans Affairs (VA) to inform patients about opportunities to participate in federally authorized cannabis studies.
—Require VA to conduct studies into the therapeutic potential of marijuana in the treatment of various conditions that commonly afflict veterans such as chronic pain and post-traumatic stress disorder.
—Reschedule marijuana from Schedule I to Schedule III under the CSA.
—Free up universities to conduct studies on cannabis by removing certain regulatory requirements.
In a letter to the Senate sponsor of that last piece of legislation, Sen. Dick Durbin (D-IL), in June, the foundation stated that marijuana’s current classification under federal law and the inadequate quality of cannabis grown at the only federally authorized manufacturing facility has meant that “researchers do not have the proper materials to conduct the necessary research.”
The foundation noted that it has submitted comments to the Food and Drug Administration arguing in favor of rescheduling in 2018 and 2019. It also applauded the Drug Enforcement Administration for announcing that it would take steps to approve additional federal cannabis farms for research.
“Current policies hinder comprehensive medical research on cannabis, making it difficult to generate the evidence needed for clear recommendations,” Andrew Koemeter-Cox, MJFF’s associate director of research programs, said. “This is especially problematic when some products may be unsafe for human use and have the potential for adverse interactions with other medications.”
Ted Thompson, the nonprofit’s senior vice president of public policy, said that removing barriers to research “is one way in which Congress can help scientific researchers determine what the benefits of medical cannabis might be for Parkinson’s disease.”
“Our role on the public policy team is to work with Congress and the administration to ensure there is access and funding for research and care initiatives that can benefit people living with Parkinson’s and, right now, that includes access to medical cannabis for research,” he said.
Photo courtesy of Brian Shamblen.