After years of government stalemate, there is finally some forward movement on cannabis legislation in the U.S. Congress.
The lack of federal cannabis laws has affected a slew of issues from criminal justice to small businesses. The banking problem, in particular, has made it difficult for legitimate, licensed business owners. For years, big banks have refused to work with cannabis businesses because marijuana is still a Schedule 1 drug on the Controlled Substances Act, on par with heroin and LSD.
Democratic Rep. Ed Perlmutter experienced this first hand. Since 2013, he has introduced and pushed for his SAFE Banking Act, which would protect banks working with licensed marijuana businesses from federal prosecution.
“We didn’t get a single hearing, much less the ability to present the bill and mark it up,” he said.
That changed this year. Not only did his bill, which has 200 co-sponsors, get a hearing and markup, it was voted out of committee and is expected to get a floor vote on soon.
And this whiff of change isn’t just in the Democratic-controlled House.
“The mood in the Senate has changed dramatically from five years ago. It’s changed dramatically from six months ago,” Republican Sen. Cory Gardner said. “There are people who are open to discussing the STATES act and SAFE act who would never talk about it a year ago. There are people who are interested in voting on this on the floor who wouldn't have said that two years ago.”
The STATES Act is Gardner’s bill with Massachusetts Democrat Elizabeth Warren. These strange bedfellows are thinking big — not legalization big — but trying to fix the federal-state conflict big. Essentially they would codify each state’s right to determine for itself the best approach on marijuana.
Currently, 11 states have legalized recreational marijuana, while 33 states allow for medical marijuana use. In states where it’s illegal, the substance would still be subject to federal law and regulations. But states including Colorado could opt out of the federal prohibition on marijuana. In other words, federal law wouldn’t apply to cannabis in Colorado.
“There’s no longer a law that is being broken. There is no longer a policy being affected, because it’s no longer subject to the prohibitions,” Gardner said.
And that means financial transactions would be legal, too. Attorney General William Barr testified in April that he prefers this kind of solution to what the country has now where some states ignore federal law.
Part of Congress’ push comes from the growing number of states that have legalized marijuana in some form. It’s an industry that’s expected to top $25 billion in sales nationwide by 2025.
It will still be a hard lift to pass cannabis legislation through Congress.
That’s one reason why Perlmutter’s bill is much narrower in focus, tackling the banking issue alone.
“Banks have been nervous about anything related to hemp, CBD, cannabis. And they should be. Because Federal law — the controlled substance act — has outlawed it for a very long time,” he said. “From a business perspective, it provides more certainty and allows for more efficient and safer operation.”
If it seems like an incremental approach, it is. But Congress tends to dip a toe in before a leg or diving in. Morgan Fox, a spokesman with the National Cannabis Association, said that’s what makes something like Perlmutter’s narrower bill appealing to lawmakers. It just tries to tackle the banking issue.
“That’s something anyone can get behind without having to take a larger stance on cannabis. In that way incrementalism is good,” Fox said
As long as the federal government keeps cannabis illegal, accessing financial services or credit is very difficult. And no bank account means no checks to pay vendors, rent, taxes or employees. That’s why many cannabis companies are still only working in cash.
“We’re dealing with the lack of access to banking and financial services, extraordinarily high levels of federal taxation and a lack of access to small biz loans because of small business administration policies,” Fox said.
When licensed companies do find banks willing to work with them, they often have to jump through hoops and pay higher fees.
“We provide them with monthly financial statements that have been looked over our accounting firms,” said Amy Andrle, who owns and operates L’Eagle Services, a dispensary and cultivation and manufacturing facility in Denver. “We’re giving them access to our point of sales systems, they’re looking at all of our tax returns.”
It’s a big business: The state issued just under 40,000 occupational licenses for people to work in the cannabis industry, according to the Department of Revenue.
Don Childers, president and CEO of the Colorado Bankers Association, thinks its about time Congress is taking up these issues. Childers thinks aspects of both the STATES Act and the SAFE Banking Act would help.
“We think that will give enough comfort that a number of other banks will enter the business. In fact, quite a number could enter the biz of banking marijuana,” he said.
But not all. Childers doesn’t expect large national banks to jump in, because they tend to develop national policies and cannabis still remains illegal nationally.
Neither of the bills making their way through the Capitol would change that. But for now, lawmakers hope to mitigate some of the negative effects a state could have when they follow a different cannabis policy than the federal government.
