A Senate committee held a hearing on Tuesday to discuss ways for cannabis businesses operating legally under state law to obtain access to banking and financial services. At the hearing, Senators and witnesses including members of the cannabis industry focused on the Secure and Fair Enforcement (SAFE) Banking Act of 2019.
Under the measure, federal banking regulators would be prohibited from penalizing banks that choose to serve cannabis firms doing business in accordance with state law. Under current regulations, banks are subject to penalties under federal money laundering and other laws for servicing such companies, leaving the cannabis industry to operate in a risky environment heavy in cash.
The Senate’s version of the measure, (S. 1200) was introduced in April by Sen. Jeff Merkley, a Democrat from Oregon, and has 31 co-sponsors. The House bill (H.R. 1595) was introduced by Democratic Rep. Ed Perlmutter of Oregon and is co-sponsored by 206 representatives. In March, the bill was approved by the Financial Services Committee and is expected to be considered on the House floor after the August recess.
Witnesses Testify at Hearing
In his testimony before the committee, Colorado Republican Sen. Cory Gardner, one of the co-sponsors of the SAFE Banking Act, testified that public opinion is in favor of a change in cannabis policy reform. Gardner also noted that the bill has bipartisan support in both houses of Congress, a rarity in today’s hyper-partisan political climate.
“There has been a dramatic shift in Americans’ views of cannabis in recent years,” Gardner said. “Polling shows that about 65% of Americans support legalization of marijuana. 93% support medical marijuana. In fact, majorities of both parties support legalization. In a time when all the talk is about how divided we are, it’s hard to find that sort of support for an issue.”
Gardner added that cannabis policy reform was even succeeding in conservative states and that in just the last year five more states, Michigan, Missouri, Oklahoma, Utah, and Vermont, had adopted or expanded marijuana programs.
“In short, the states are leading on this issue, and the federal government has failed to respond,” he said. “It has closed its eyes and plugged its ears and pretended the issue will go away. It won’t.”
Current Rules an Unfair Burden on Cannabis Industry
Another witness who testified before the committee, John Lord, the board chair of the Cannabis Trade Federation and the CEO of a Colorado vertically-integrated operator in the industry, said that current regulations put a substantial burden on cannabis businesses.
“Due to the dichotomy between state and federal laws, banks and credit unions have been reluctant to serve cannabis businesses or have refused to do so altogether,” Lord told the committee. “In some cases, banks that were willing to work with cannabis companies were discouraged or prevented from doing so by their regulators. As a result, we have frequently struggled to obtain and maintain bank accounts with egregiously high fees.”
Lord also noted that the negative impacts of current regulations hit small firms the hardest.
“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,” he added. “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.”
Cannabis Insurance Measure Introduced
Before Tuesday’s hearing, Democratic Sen. Bob Menendez of New Jersey announced that he was introducing a bill that would give the cannabis industry greater access to insurance services. The bill would protect insurers who offer coverage to cannabis firms and associated firms such as landlords and attorneys.
“Current federal law prevents these small business owners from getting insurance coverage, and without it, they can’t protect their property, employees, or customers,” Menendez said. “We can solve this problem with legislation that allows insurance companies to provide coverage to these enterprises without risk of federal prosecution or other unintended consequences.”