What's Standing in the Way of Cannabis Banking

If you were to ask anybody in the developed cannabis industry — or the states which host it — what their biggest requests were from the federal government, legalization notwithstanding, having the ability to access banking services would rank on top of the list. Yet according to the latest data from the Financial Crimes Enforcement Network, which administers guidance to and surveillance for the credit unions and banks working with the cannabis industry, only 684 depository institutions are currently working with the industry, out of America’s 5,300 state and local banks/credit unions. This leads to many problems and hassles for the businesses and the communities which host them: occasional and abrupt shutdowns of bank accounts, the inability to receive loans except at usurious rates and continued crime. In March, for instance, three people were killed in the space of four days in Washington state during dispensary robberies, spurring the state’s Treasurer to call for the immediate passage of the SAFE Act, a piece of legislation which has passed the Federal House six times since it was first introduced. The legislation would instruct federal bank regulators not to prosecute banks and credit unions under anti-money laundering laws, clearing the way for financial normalization and, eventually, legalization.

However, the legislation has always stalled in the Senate, most recently in December. The bill’s sponsor, Rep. Ed Perlmutter (D-CO) will be retiring this year. And speculation that both the House and the Senate may slip from the Democrats’ grasp in November suggest that it’s now or never for some form of cannabis reform. So what’s stopping cannabis banking from heading to Biden’s desk?

The Sure Thing?

While nothing is ever done until it’s done, popular wisdom holds that if held up for a vote, cannabis banking has the best chance to pass the Senate, and even win potential votes from Republicans who otherwise have no desire to federally legalize cannabis. However, the Senate has its own version of the House’s MORE Act, a separate cannabis bill which federally decriminalizes cannabis, called the Cannabis Administration and Opportunity Act (CAOA). Amongst other things, this bill removes cannabis from the federal list of controlled substances, creates a federal tax and clarifies a new relationship between federal and tribal authorities. However, its passage in the Senate is far from certain, as Republicans like Marco Rubio, John Corwyn and Mitt Romney have already expressed their resistance to larger legalization, even as they represent states with legal medical programs.

Senate Majority Leader Chuck Schumer and his partner Cory Booker have resisted the SAFE Act because of their desire for the larger cannabis reforms spelled out in the CAOA. Initially scheduled for 420, Chuck Schumer’s office announced in mid-April that the CAOA would be pushed back for a release before the month-long August recess, perhaps positioning it for the November midterms.

Agitation from the States

That hasn’t stopped state officials from sending their own stopgap measures to assure bankers and insurance professionals of the cannabis industry’s legitimacy, at least as far as they’re concerned. A bill that essentially recapitulates the SAFE Act for Pennsylvania passed its House by a vote of 46-3. A New York bill that would share information about cannabis businesess with banks uncertain about working with them has also been introduced in their legislature. And in California, banks are fully permitted to work with licensed cannabis businesses by state law.

In the meantime, the American Bankers Association sent a letter in December alongside affiliated bankers associations from all 50 states and Puerto Rico urging passage of the SAFE Act back when it was attached to the National Defense Authorization Act. Over on the credit union side, board member of the National Credit Union Administration recognized in remarks given to the Emerging Markets Coalition that while actions on the state side were helpful, “We need a federal solution, not a patchwork of state reforms.”

For now, the SAFE Act sits as a provision within the larger COMPETES Act. Rep. Maxine Waters has labeled the SAFE Act as a priority for now, but its fate will most likely be decided in committee. Whether or not the CAOA’s postponement towards later in the summer will impact on the SAFE Act’s fate remains to be seen.