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.
Federal Agency Loosens Marijuana-Related Grant Funding Restrictions For Mental Health Treatment
The federal Substance Abuse and Mental Health Services Administration (SAMHSA) loosened restrictions this week on grant funding for state health providers and other entities that allow patients to use medical marijuana for mental heath treatment.
The Pennsylvania Department of Drug and Alcohol Programs flagged the new policy change in a notice to SAMHSA grant recipients on Monday. It said that the federal agency has removed language from its terms and conditions that until now has prevented grant funds from going to any institution that “provides or permits marijuana use for the purposes of treating substance use or mental disorders.”
This restriction led the state department to issue a memo in June warning recipients and applicants about the possible withholding of funding.
Despite the recent change, SAMHSA is still continuing a narrower ban that says federal funds themselves “may not be used to purchase, prescribe, or provide marijuana or treatment using marijuana.”
The broader prohibition, which has now been rescinded, prompted a notice last year from Maine’s Education Department, which said is was no longer eligible for certain federal funds to support mental health programs in schools because the state allows students to access medical marijuana.
It seems the federal agency is now being somewhat more permissive.
Here’s how SAMHSA’s updated marijuana restriction reads:
“SAMHSA grant funds may not be used to purchase, prescribe, or provide marijuana or treatment using marijuana. See, e.g., 45 C.F.R. 75.300(a) (requiring HHS to ensure that Federal funding is expended in full accordance with U.S. statutory and public policy requirements); 21 U.S.C. 812(c)(10) and 841 (prohibiting the possession, manufacture, sale, purchase or distribution of marijuana).”
The older, more broad prohibition read:
“Grant funds may not be used, directly or indirectly, to purchase, prescribe, or provide marijuana or treatment using marijuana. Treatment in this context includes the treatment of opioid use disorder. Grant funds also cannot be provided to any individual who or organization that provides or permits marijuana use for the purposes of treating substance use or mental disorders. See, e.g., 45 C.F.R. § 75.300(a) (requiring HHS to “ensure that Federal funding is expended in full accordance with U.S. statutory requirements.”); 21 U.S.C. §§ 812(c)(10) and 841 (prohibiting the possession, manufacture, sale, purchase or distribution of marijuana). This prohibition does not apply to those providing such treatment in the context of clinical research permitted by the DEA and under an FDA-approved investigational new drug application where the article being evaluated is marijuana or a constituent thereof that is otherwise a banned controlled substance under federal law.”
The marijuana restrictions were first added to grant award terms for Fiscal Year 2020. The language was initially carried over to Fiscal Year 2021 but was more recently switched out for the narrower language by the federal agency.
In a January 2020 FAQ that the Pennsylvania department shared from SAMHSA this June, the federal agency responded to a prompt inquiring whether grant recipients can serve patients who are “very clear about their wish to remain on their medical marijuana for their mental or substance use disorder.”
“No. The organization cannot serve a patient who is on medical marijuana for a mental or substance use disorder and wishes to remain on such treatment,” it said. “SAMHSA promotes the use of evidence-based practices and there is no evidence for such a treatment; in fact, there is increasing evidence that marijuana can further exacerbate mental health symptoms.”
While the agency seemed adamant in enforcing that policy at the time, it appears to have had a change of heart and has since loosened the restriction.
A SAMHSA spokesperson told Marijuana Moment that the new rules took effect on Sunday, but played down their significance.
“This Aug. 1 clarification simply made clearer what was already in place: SAMHSA funds should not be used to procure a federally prohibited substance,” he said in an email.
While it is true that the revised provision, as was the case in the prior language, states that federal funds cannot be used to pay for marijuana, the spokesperson avoided commenting on the new deletion of the broader prohibition on grants going to entities that otherwise allow patients to use medical cannabis to treat substance use or mental disorders.
After SAMHSA announced in 2019 that its marijuana policy would impact organizations applying for its two main opioid treatment programs and another that provides funding to combat alcoholism and substance misuse, the Illinois Department of Human Services and Oregon Health Authority issued notices on the impact of the rule.
Read the Pennsylvania department’s notice on the SAMHSA marijuana policy change below:
Photo courtesy of Philip Steffan.
Mexican Lawmakers Could Finally Legalize Marijuana Sales Next Month (Op-Ed)
The legislature missed repeated deadlines, and then the Supreme Court moved to allow homegrow. What’s next?
By Zara Snapp, Filter
Mexico has never seemed so close and yet so far from fully regulating the adult-use cannabis market.
A first Supreme Court resolution determined in 2015 that the absolute prohibition of cannabis for personal use was unconstitutional because it violates the right to the free development of personality. To reach jurisprudence in Mexico, five consecutive cases, with the same or more votes each time, must be won before the Supreme Court. This was achieved in October 2018, which detonated a legislative mandate that within 90 days, the Senate should modify the articles in the General Health Law that were deemed unconstitutional.
The first deadline came and went without the Senate modifying the articles; so the Senate requested an extension, which was granted. The second deadline to legislate expired on April 30, 2020—but another extension was provided because of the COVID-19 pandemic.
At first, it looked like the third time was the charm. The Senate overwhelmingly approved the Federal Law to Regulate and Control Cannabis in November 2020 and passed it to the Chamber of Deputies, the lower house, for review and approval. Since the deadline of December 15, 2020, was fast approaching, the Chamber asked for its own extension. The Supreme Court granted it (until April 20, 2021) and the bill underwent significant changes before being approved by the Chamber on March 10, and so sent back to the Senate.
The Senate certainly had enough time to review and either reject or accept the changes made by the lower house. That would have made this a shorter story. However, the Senate had other plans. Rather than approve the bill or request an additional extension, it simply did not do anything. June’s national midterm elections were approaching, and political calculations were made. The legislative process came to a standstill.
Since the Senate did not approve the bill by the deadline, the Supreme Court basically did what it had mandated Congress to do. It activated a mechanism to guarantee rights that had only been undertaken once before in Mexican history: the General Declaration of Unconstitutionality (GDU).
On June 28, the Supreme Court approved, with a qualified majority of eight of the 11 Ministers, that two articles in the General Health Law must be modified to permit adults to cultivate cannabis for personal use in their homes.
These changes were officially published on July 15, with specific instructions to the Health Secretary to approve authorizations for any adult who applies.
The GDU has certain restrictions attached, including that this is only for personal use and cannot be used to justify any commercialization of cannabis or cannabis-derived products. Adults cannot consume in front of minors, or other adults who have not expressly given their permission. Nor can they operate heavy machinery or drive while under the effects.
With the GDU, the judicial process concludes. However, the Supreme Court was clear in its final recommendations: Congress can and should legislate to clear up inconsistencies and generate a legal framework for cannabis users.
Whether the Senate decides to take up the matter again in September when it returns to its legislative session will depend largely on its political whim. The body no longer has a deadline to meet; however, there are growing calls from society to regulate the market beyond home-grow, as well as several legal contradictions that obviously need to be harmonized.
The General Health Law has now been modified and the health secretary must approve permits or authorizations for adults to cultivate in their homes. But the Federal Criminal Code has not changed—it still penalizes those same activities with sanctions ranging from 10 months to three years or more in prison.
The Supreme Court decision ignores the need for a comprehensive regulation that would allow the state to apply taxes to commercial activities, which are currently still criminalized with penal sanctions. It also overlooks the urgency of an amnesty program for the thousands of people currently incarcerated on low-level cannabis charges, or hampered by criminal records for such charges.
The Senate should now revisit the bill it initially passed. It should maintain the positive aspects of the bill, which would improve things well beyond the scope of the Supreme Court decision. These include provision for cannabis associations (permitting up to four plants per person for up to 20 members), for home-grow without the need to request authorization, and for a regulated market with a social justice perspective—allocating 40 percent (or more!) of cultivation licenses to communities harmed by prohibition and imposing restrictions on large companies.
The Senate could also build upon the previous version of the bill by eliminating simple possession as a crime, by allowing the associations to operate immediately and guaranteeing the participation of small and medium companies through strong government support.
During the last three years, and before, civil society has closely accompanied the process of creating this legislation, providing the technical and political inputs needed to move forward in a way that could have great social benefits for Mexico.
By becoming the third country in the world to regulate adult cannabis use, after Uruguay and Canada, Mexico could transition from being one of the largest illegal producers to being the largest legal domestic market in the world. As well as economic benefits, this could have substantial impacts on how criminal justice funds are spent, freeing up law enforcement dollars to focus on high-impact crimes and changing the way the state has shown up in communities that cultivate cannabis.
Rather than eradicating crops, the government could accompany communities in gaining legal licenses, provide technical assistance and improve basic services. These positive externalities of regulation could signal a shift from a militarized state of war to a focus on rights, development and social justice.
Of course, this all depends on key political actors recognizing the benefits—and that requires political will. Mexico deserves better; however, it remains to be seen whether legislators will act.
This article was originally published by Filter, an online magazine covering drug use, drug policy and human rights through a harm reduction lens. Follow Filter on Facebook or Twitter, or sign up for its newsletter.
Oregon Governor Plans To Veto Bill To Regulate Kratom Sales That Advocates Say Would Protect Consumers
The governor of Oregon has announced her intent to veto a bill that’s meant to create a regulatory framework for the sale and use of kratom for adults.
The Oregon Kratom Consumer Protection Act is bipartisan legislation that would make it so only people 21 and older could purchase the plant-based substance, which some use for its stimulating effects and which others found useful in treating opioid withdrawals.
Vendors would have to register with the state Department of Agriculture to sell kratom. The agency would be responsible for developing regulations on testing standards and labeling requirements. The bill would further prohibit the sale of contaminated or adulterated kratom products.
But while the House and Senate approved the legislation in June, Gov. Kate Brown (D) said on Sunday that she plans to veto it, in large part because she feels the federal Food and Drug Administration (FDA) is better suited to regulate the products.
“Given there is currently no FDA-approved use for this product and there continues to be concern about the impacts of its use, I would entertain further legislation to limit youth access without the state agency regulatory function included in this bill,” the governor said.
This comes as a disappointment to advocates and regulators who share concerns about the risks of adulterated kratom but feel a regulatory framework could help mitigate those dangers and provide adults with a safe supply of products that have helped some overcome opioid addiction.
“Kratom has been consumed safely for centuries in Southeast Asia and Americans use it in the same way that coffee is used for increased focus and energy boosts. Many use kratom for pain management without the opioid side effects,” Rep. Bill Post (R), sponsor of the bill, wrote in an op-ed published in June. “The problem in Oregon is that adulterated products are being sold.”
“Kratom in its pure form is a natural product,” he said. “Adulterated kratom is a potentially dangerous product.”
Pete Candland, executive director of the American Kratom Association, said in written testimony on the bill in February that four other states—Utah, Georgia, Arizona and Nevada—have enacted similar legislation with positive results.
He said that “the number of adulterated kratom products spiked with dangerous drugs like heroin, fentanyl, and morphine in those states has significantly decreased” in those states.
Meanwhile, six states—Vermont, Alabama, Indiana, Wisconsin, Arkansas and Rhode Island—have banned kratom sales altogether.
Candland said that number is actually a testament to the noncontroversial nature of the plant, as prohibition is only in effect in six states despite “a full-throated disinformation campaign on kratom by the FDA with outrageously untrue claims about kratom being the cause of hundreds of deaths.”
After failing to get kratom prohibited domestically, FDA recently opened a public comment period that’s meant to inform the U.S. position on how the substance should be scheduled under international statute.
“Kratom is abused for its ability to produce opioid-like effects,” FDA wrote in the notice. “Kratom is available in several different forms to include dried/crushed leaves, powder, capsules, tablets, liquids, and gum/ resin. Kratom is an increasingly popular drug of abuse and readily available on the recreational drug market in the United States.”
Responses to the notice will help inform the federal government’s stance on kratom scheduling in advance of an October meeting of the World Health Organization’s (WHO) Expert Committee on Drug Dependence, where international officials will discuss whether to recommend the substance be globally scheduled.
Last week, the U.S. House of Representatives approved a report to spending legislation that says federal health agencies have “contributed to the continued understanding of the health impacts of kratom, including its constituent compounds, mitragynine and 7-hydroxymitragynine.”
It also directed the Health and Human Services secretary to continue to refrain from recommending that kratom be controlled in Schedule I.
Late last year, the Agency for Healthcare Research and Quality (AHRQ) asked the public to help identify research that specifically looks at the risks and benefits of cannabinoids and kratom.
The Centers for Disease Control and Prevention (CDC) last year separately received more than one thousand comments concerning kratom as part of another public solicitation.
Photo courtesy of Wikimedia/ThorPorre.