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Lawmakers' solution to the cannabis industry's all-cash operations problem is called the SAFE Banking Act, and on March 28, 2019, the proposed legislation took a big step forward, clearing the Financial Services committee by a wide margin.

U.S. Democratic Rep. Ed Perlmutter of Colorado, along with fellow Democratic Rep. Denny Heck of Washington and Ohio Republican Reps. Steve Stivers and Warren Davidson, presented the bill, formally known as the Secure and Fair Enforcement Act, which would provide protection for banks and financial institutions working with legal cannabis businesses. The committee supported moving the legislation by a vote of 45 to 15, including support from several Republican lawmakers.

Marijuana businesses in Colorado are positively awash in cash, according to Perlmutter. Anecdotes abound of dispensary owners burying bags of cash because they can't find banks to accept their deposits.

It may sound like there are worse problems to have, yet having too much cash is a serious problem, Perlmutter told the House Financial Services Committee on March 28, 2019, as it considered HR 1595, the banking bill he co-sponsored that aims to clear the path for banks to deal with marijuana-related businesses in states where it is legal.

So far, no action has been taken against banks that offer services to legal cannabis businesses, but risks remain. Banks could face federal charges of money laundering. Some financial institutions can operate beyond the restrictive rules, while others steer clear, an impasse that has caused most dispensaries to accept only cash.

Those masses of cash create safety issues for businesses and their employees, Perlmutter said. Colorado has seen a murder and several armed robberies. He also cited a Detroit robbery of a medical marijuana dispensary in which thieves drove a truck through a wall to gain entry.

“It is our job to address this and no longer ignore it,” he said.

Supporters seem confident the law will move forward. There are already 152 co-sponsors in the House, which is an unprecedented number for any cannabis reform bill, according to Morgan Fox, the media relations director for the National Cannabis Industry Association.

He was not certain when the bill might come up for a vote on the House floor, but he said he is confident it will pass there.

The bill may have a tougher time in the Republican-controlled Senate, but Fox said his organization is hopeful there as well, saying the bill is narrowly focused, pro-business, and avoids saying marijuana should be legalized, instead leaving that issue to states.

If both houses get on board, the bill would head to the president's desk.

“I think we can probably count on administrative support,” Fox said, citing the current administration's pro-business leanings and the strong support of the public for the move.

A March 25 letter in support of the bill, signed by Rob Nichols of the American Bankers Association and Jim Nussle, president and CEO of the Credit Union National Association, likely served as a big push for the measure.

Without the reform, the letter argues, even businesses with a tangential connection to the cannabis industry, such as vendors, suppliers, and utility companies, could otherwise face risks.

Support was not universal. Among those speaking in opposition on the finance committee was Republican Rep. William Blaine Luetkemeyer of Missouri. He argued that before reforming banking rules, proponents instead should work to recategorize cannabis under the Federal Controlled Substances Act, where the plant is listed on Schedule I, the most restrictive level that deems it to have no medicinal value and a high potential for abuse.    

Perlmutter addressed the constraints of the 1971 Controlled Substance Act, which he said listed marijuana as a Schedule I drug with “little debate and no data,” making it illegal for all purposes. He said the American people have taken the matter into their own hands, including with the votes in Colorado, first to allow the medical use of cannabis and later its use for all adults.

He said Congress has a responsibility to act, “so that legitimate businesses — businesses that are legitimate in their states — can get legitimate banking services; credit cards, payroll, checking accounts, lending.”

Stivers, the Ohio Republican, put the issue as a matter of fairness to employees of cannabis businesses, who at times are paid in cash and have trouble getting access to car loans and mortgages.

“The whole point of this bill is to make cannabis-related businesses safe for the employees, for the customers, and to make sure that these businesses can't evade taxation, all things that a cash system allows,” Stivers told the committee. “Not having access to the banking system creates lots of problems, not just for these businesses to make them unsafe, but has real, human impacts on employees.”

Committee chair Rep. Maxine Waters of California described the bill as one component of a series of broader reforms that are needed. At one point in the hearings leading up to the March 28 vote, she said, “It is time the federal government takes some steps to catch up with what is happening at the local and state level.”

The bill saw support from throughout the ideological spectrum. The R Street Institute, often described as a conservative or libertarian think tank, applauded the bill moving forward. Current laws can discourage financial institutions from dealing with cannabis-related businesses, leaving many dispensaries as cash-only operations.

“While some lenders have dipped their toes into the cannabis market, most did so initially under the legal safe harbor offered by the 2013 Cole Memorandum, which the U.S. Justice Department formally rescinded in January 2018,” said R.J. Lehmann, the director of finance, insurance, and trade policy for the R Street Institute in a statement. “Because of this uncertainty, lenders who serve the market need to be prepared to unwind their loans at any moment. And without the kind of permanent safe harbor the SAFE Banking Act offers, many other lenders — including those with the kinds of robust compliance processes needed to service this sector effectively — remain on the sidelines.”

Legalization advocates and cannabis industry groups were in high spirits after the vote. Groups including the National Organization for the Reform of Marijuana Laws (NORML), the National Cannabis Industry Association, and others applauded the committee's move. Supporters say amendments approved at the committee level should improve the bill's chances moving forward.

The SAFE Banking Act would go a long way toward improving safety, transparency, access, and justice in the cannabis industry. Click To Tweet

“The SAFE Banking Act would go a long way toward improving safety, transparency, access, and justice in the cannabis industry,” said Aaron Smith, executive director of the National Cannabis Industry Association in a statement. “The amendments agreed upon in committee should solidify the already overwhelming support for this legislation in the House. The cannabis and financial services industries have been waiting for clarification and protection for far too long, and we are confident the House would approve this bill if allowed to vote on it without further delay.”

“This is a positive step forward to address an untenable tension between state-legal cannabis marketplaces and federal marijuana prohibition,” Justin Strekal, the political director for NORML, said in a statement. “No industry can operate safely, transparently, or effectively without access to banks or other financial institutions.”