Marijuana Industry Bank Reform on Capitol Hill Agenda
While the continued legalization of recreational and medicinal use of marijuana at the state level has undoubtedly been a win for liberty, there remains much work to do as to normalize the burgeoning marijuana industry in the broader legal and economic fabric of the nation.
In September 2017, Regina Liszanckie received a license in the State of Washington to open Plantworks, a legal marijuana “producer-processor” plant specializing in high-end “craft” product. Four months later in January 2018, the 2,500 square foot facility in Seattle’s North End was targeted by thieves who made out with 26 pounds of premium marijuana valued at $52,000. Her case is just one example chronicled in a recent Politico Magazine piece titled The Great Seattle Pot Heist which details the slew of robberies at dozens of legal marijuana growers and dispensaries across the Pacific Northwest as of late.
The piece goes on to note that while legalization of the drug in these states has brought about a great deal of government oversight, it seems to have also had an adverse effect on the safety and security of the industry. For example, one aspect of the regulation around the industry requires businesses to file reports with “detailed floor plans showing where plants are grown, inventory is stored and security cameras are located as well as delivery-route manifests.” Besides being overly burdensome, hackers have exploited data like this in weak government databases and used the info to burglarize mom-and-pop pot shops up and down the West Coast.
In addition to stealing weed, the thieves often find access to thousands of dollars in cash since only 30 percent of marijuana related businesses use a bank or similar depository institution. Not the fault of the businesses themselves, the federal government still classifies marijuana as a Schedule I drug, the same as heroin. Given the often risk-adverse nature of banks, many are hesitant to offer services to these businesses out of fear of breaking either federal drug laws or money laundering laws. This has left most to conduct their dealings in cold, hard cash. The situation was further worsened last year when then-Attorney General Jeff Sessions reversed an Obama-era policy that eased federal enforcement of marijuana laws which made it easier for banks to do business with the legal marijuana industry.
As noted in the Politico piece, “federal prohibition and the lack of traditional banking services have created the largest security risk for cannabis businesses.” Clearly something needs to be done, especially when considering the legal marijuana industry currently stands at $13.8 billion and is expected to grow at a compound annual growth rate of 23.9%—reaching $66.3 billion by 2025.
As Congress returns from its summer recess, legislators should act to clarify the legal and regulatory questions around marijuana banking. Luckily, there are some options already on the table to do just that. The SAFE Banking Act, for example, was passed out of the House Financial Services Committee in March and the Senate Banking committee held a hearing later in July to discuss the issue and proposed solutions like this one.
The SAFE Banking Act provides safe harbor protections for financial servicers engaging with marijuana businesses. Unlike past iterations of the legislation, the current version also includes provisions that extend protections for ancillary businesses such as real estate owners and accountants.
While a divided Congress usually presents challenges that can stymie legislative action on controversial issues, marijuana banking reform is actually an overwhelmingly bipartisan issue. Led in the House by Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH), and Warren Davidson (R-OH), the SAFE Banking Act has 206 cosponsors from both sides of the aisle and was reported out of committee with a 45-15 margin. An accompanying bill in the Senate, S.1200, has 31 cosponsors as well.
Thirty-eight state attorneys general have signed a letter backing the bill. Beyond that, the legislation is supported by a number of industry trade associations such as the American Bankers Association, the Independent Community Bankers of America, and the Credit Union National Association. Additionally, in July, the Competitive Enterprise Institute and other free-market groups signed onto a coalition letter urging the Senate to pass the proposed law. Broadly speaking, the Trump administration seems open to such measures as both Attorney General William Barr and Treasury Secretary Steven Mnuchin have expressed support for reforming the laws around marijuana banking.
In ballot boxes and state legislatures across the nation, citizens and their representatives have done a great deal to take marijuana out of the illegal underground and put it into legal Main Street storefronts. The federal government should follow their lead and at the very least enact legislation that respects states’ authority and the ability of a bank and a private business to engage in free enterprise with one another. Passage of the SAFE Banking Act would do just that, while also helping business owners sleep in peace knowing that their hard-earned money is protected.