The House of Representatives could eliminate a major point of legal friction between states and the federal government in order to make it easier for banks to serve pot businesses.
While states are moving to legalize marijuana use, either for medicinal purposes or for recreation, federal law prohibits banks or credit unions from directly doing business with such companies. Because cannabis remains an illegal scheduled substance, laws against money laundering block banks, insurance companies, credit unions, and other financial services firms from working with dispensaries or other marijuana-related businesses operating legally at the state level.
The discrepancy causes major side effects. Even when cannabis businesses operate legally, most still do business in cash because the regulatory liability of banking is too great. This has led marijuana shops to hire armored vehicles to transport stacks of cash to state capitals to pay their taxes, and it has raised robbery concerns.
“We’ve seen that, across the country, huge piles of cash are created by these businesses and particularly create huge public safety hazards,” said Rep. Ed Perlmutter, D-Colo., sponsor of legislation to allow banks to serve legal marijuana businesses, speaking at a March hearing.
“This is not about legalizing marijuana,” said Don Childears, president and CEO of the Colorado Bankers Association. “In Colorado we’ve had a murder, we’ve had robberies where guns are stuck in people’s mouth and cash is stolen.”
Bankers have felt squeezed by the conflict for years, as now 33 states allow cannabis for either recreational or medicinal purposes. The problem has led to a strange alliance between pot legalization advocates and bankers. The effort to legalize banking for marijuana businesses has drawn the support of both the American Bankers Association and the National Organization for the Reform of Marijuana Laws.
Perlmutter’s bill, the Secure and Fair Enforcement, or SAFE, Banking Act, would grant financial companies the right to provide services such as taking deposits from, and providing payments to, marijuana businesses. Federal financial regulators would be required to grant flexibility in states that have already legalized marijuana.
Although similar legislation had been blocked in the past, in late March the House Financial Services Committee favorably reported Perlmutter’s bill on a bipartisan basis, 45-15. The issue split the Republicans on the committee. Some supported the bill on the grounds that the federal government should stay out of state decisions, while others opposed it on the basis that it effectively enables an activity that’s still illegal in parts of the country.
“The issue at the root of this conversation is the Controlled Substance Act,” Rep. Blaine Luetkemeyer, R-Mo., said at the committee’s markup of Perlmutter’s bill. “However, my colleagues do not want to have a conversation about the classification of marijuana. Instead they are putting the cart before the horse by creating a safe harbor for the financial services industry.”
In the end, 11 Republicans voted for the bill in committee and 15 voted against it. It’s not clear yet when it may receive a vote on the House floor or whether it will receive a vote on the Senate floor if it passes the House as expected.
Bankers are engaging in a behind-the-scenes lobbying blitz to grow Republican support for the bill, which currently has 12 Republican co-sponsors out of a total of 152. If supporters whip up more Republican votes, they hope, there will be enough momentum to move through the Senate and become law.
“Sen. [Cory] Gardner [R-Colo.] has had plenty of conversations to indicate that he’s confident the president would sign it,” said Childears. “There’s clearly more momentum. The question is whether there’s enough to get it through the Senate.”
Despite the enthusiasm of Childears and other supporters, prospects in the upper chamber remain unclear. Senate Banking Committee spokeswoman Amanda Critchfield told the Washington Examiner that the committee’s chairman, Sen. Mike Crapo, R-Idaho, “has not made any decisions on whether to hold a hearing on the legislation.”
