The U.S. banking industry has a marijuana problem.
Cannabis is legal in some form in more than two dozen states. But it is still illegal on the federal level, leaving most risk-averse banks too scared to do business with legal marijuana businesses for fear of angering their regulators.
The banking industry, having spotted a potentially lucrative untapped market, has pushed lawmakers for years to tackle the issue, to no avail. They may finally be getting somewhere.
On Wednesday, the U.S. House of Representatives held its first hearing on the topic, an event considered so momentous that several banking groups sent out news releases and held conference calls.
“Today’s hearing is a big deal,” said Rep. Ed Perlmutter (D-Colo.), who has been pushing legislation to address the issue for years.
The House Financial Services subcommittee took up proposed legislation, the Secure and Fair Enforcement Banking Act of 2019 or SAFE Banking Act, that would protect banks and their employees from punishment for providing services to cannabis businesses that are legal on a state level.
Some small banks have offered accounts to marijuana businesses but acknowledge it creates new regulatory burdens. Most, such as Washington-based State Bank Northwest, say even offering someone who works for a dispensary a loan or doing business with a local utility can create a headache.
“We have a major energy provider. Naturally, their customers include cannabis-related businesses,” bank President Gregory Deckard told the committee, explaining why State Bank Northwest has stayed out of the business. “For that reason alone, my bank cannot bank this utility without assuming legal risk and additional compliance burdens.”
Without a bank account, legal marijuana businesses must operate on a cash basis, making them targets for robberies, supporters of the legislation testified. In California, cannabis dispensaries have dropped off duffel bags and suitcases full of cash to pay their taxes, Fiona Ma, the state’s treasurer, told the committee. Some drive hundreds of miles to drop off the money, she said.
“We have the power in this committee to prevent murders and armed robberies, and we must use it, we must use it now,” said Rep. Denny Heck (D-Wash.), who is co-sponsoring the legislation.
Two weeks of pay for an employee of a cannabis business can top a few thousand dollars, said Maj. Neill Franklin, who spoke on behalf of the Law Enforcement Action Partnership.
“I fear dispensary employees being at great risk,” he told the committee.
The proposed legislation’s prospects are unclear. The Republican-controlled Senate has yet to take up the issue, and industry analysts say there may not be enough political will to push through a stand-alone bill. Some Republicans on the committee said it was premature to address how banks can serve an industry the federal government still considers illegal. Taking action now, they said, would just sow more confusion.
“Today we are discussing the merits of allowing federally illegal businesses to access banking services,” said Rep. Blaine Luetkemeyer (R-Mo.), the ranking Republican on the subcommittee. “As far as I know, the House Financial Services Committee does not have jurisdiction over descheduling a drug.”
The marijuana business has received sometimes unexpected political support in recent years. Former House speaker John A. Boehner was once staunchly against the legalization of marijuana but is now heading up a pro-cannabis lobbying group. In 2017, Sen. Cory Booker (D-N.J.) sponsored a legalization bill that included expunging federal marijuana convictions. His Democratic presidential primary opponent, Sen. Kamala D. Harris (D-Calif.), said on a radio interview she smoked marijuana years ago.
But that type of support may not be enough to move Congress on the issue.
“There are a lot of dangers associated with cannabis,” Jonathan Talcott, chairman of Smart Approaches to Marijuana, a nonprofit that opposes legalization, told the committee.