New Legislation Could Solve the Cannabis Industry’s Banking Problem

One of the biggest obstacles that businesses operating in the cannabis industry face is finding a bank that will work with them. Even ancillary marijuana businesses and people and businesses associated with the marijuana industry have banking problems. To date, there isn’t a perfect solution. While some startups are trying to solve those problems, former Attorney General Jeff Sessions seemed to be leading the charge against all things marijuana-related during the past two years. But all of that could finally change if new legislation moves through the political maze in Washington.

The Bi-Partisan Legislation Banks Pushed For is Here

Rep. Ed Perlmutter (D-CO) is crafting legislation that is co-sponsored by 82 Democrats and 13 Republicans and is expected to pass the House Financial Services Committee (the group that writes banking industry rules). The legislation would ease rules for cannabis banking – something the Independent Community Bankers of American and the Credit Union National Association both endorse.

In simplest terms, banks want to be protected from losing their national charters and regulatory trouble if they work with businesses that touch marijuana across the supply chain as well as with those that service and support the cannabis industry without ever touching the plant at all.

For marijuana businesses, the goal is simply to be able operate so they can be competitive and safe. Businesses that can’t find financial institutions to work with face significant safety problems when they’re forced to operate in an all cash model. As Sundie Seefried, CEO/President of Partner Colorado Credit Union & Safe Harbor Private Banking, says, “The money is better banked than unbanked.”

3 Reasons Cannabis Banking Legislation is Gaining Traction Now

The marijuana business banking problem isn’t new, so why is it just gaining momentum in the House Financial Services Committee? The answer isn’t just a push from banks and marijuana businesses. It’s far more political than that. In fact, it could be said there are three main reasons why cannabis banking legislation is finally gaining traction.

1. Attorney General Jeff Sessions is Now Former Attorney General Jeff Sessions

It was common knowledge that Former Attorney General Jeff Sessions was anti-cannabis, and many of the actions he took while in the role of Attorney General hurt the cannabis industry. However, with Sessions out of the picture, things could get better for marijuana businesses and marijuana-related businesses.

2. Democrats Took Control of the House of Representatives (and the House Financial Services Committee)

The November 2018 election ended with a blue wave which resulted in Democrats regaining control of the House of Representatives. Democrats have been more supportive of cannabis-reform in recent years than Republicans, so this bodes well for the industry.

In addition, Pete Sessions (R-TX), the Republican chairman of the House Financial Services Committee is on his way out. Rep. Maxine Waters (D-CA) is expected to take his place in the new year. The good news for the cannabis industry is Waters has publicly stated that conversations will need to take place about cannabis reform in the near future. That is a good sign that changes could be coming for cannabis-related financial services.

3. Democrats Don’t Want President Trump to Get Credit for Ending Cannabis Prohibition (or Anything Else Related to Cannabis)

Another key factor that is causing lawmakers to take action on the cannabis banking problem now is a growing fear that President Trump will get credit for cannabis legalization, decriminalization, and/or any other pro-cannabis changes that happen while he’s in office.

In October, Rep. Earl Blumenauer (D-OR) sent a memo to the House Democratic Leadership that included a Blueprint to Legalize Marijuana in the 116^th Congress. In the memo, Blumenauer wrote:

“Congress is out of step with the American people and the states on cannabis. We have an opportunity to correct course if Democrats win big in November. There’s no question: cannabis prohibition will end. Democrats should lead the way. If we fail to act swiftly, I fear as the 2020 election approaches, Donald Trump will claim credit for our work in an effort to shore up support—especially from young voters. Democrats must seize the moment. This memo outlines actions that a newly-elected Democratic Majority should take immediately in the 116th Congress to achieve these desperately-needed reforms by the end of 2019.”

Blumenauer’s “Timeline for Success” as it relates to banking includes:

• January 2019 to March 2019: The House Financial Services Committee should have a hearing on the barriers to safe access to both banking services and capital as well as “unnecessary and unwise” barriers to banking services for state legal marijuana businesses.
• April 2019 to June 2019: The House Financial Services Committee should start “marking up bills in their jurisdiction that would responsibly narrow the marijuana policy gap” (i.e., the gap between state and federal laws) as it relates to access to financial services.
• By August 2019: The House should pass a package of bills addressing financial services in the cannabis industry as well as a list of other policy issues outlined in the memo.
• September 2019 to December 2019: The House should pass a full marijuana de-scheduling bill and “work with Senate allies to guide the bill through Senate passage.”
• By the End of 2019: Marijuana should be legal at the federal level, and states should be allowed to “responsibly” regulate its use at that time.

Bottom-line, with legalization of cannabis at the federal level by the end of 2019, as Blumenauer outlines, the banking problem would be solved within a year.

What’s Next?

Only time will tell if cannabis banking reform comes to fruition or not, but there is certainly more momentum in Congress, more public support, and more political reasons to make significant changes sooner rather than later.

As Blumenauer said in a statement reported by Roll Call, “As of today, our ally to the north is outpacing us.” That’s just one more reason lawmakers have more incentive than ever to bring reform to the cannabis industry, including financial services reform.

Photo by Jomar on Unsplash