Anyone who hoped that a narrow cannabis banking fix might skirt past a broader debate over cannabis legalization was quickly realigned Wednesday during Congress’ first hearing on cannabis-related banking reform.
GOP members on the House Consumer Protection and Financial Institutions Subcommittee told Democrats and experts that addressing how to grant cannabis businesses access to bank accounts was “putting the cart before the horse,” as the panel’s top Republican, Blaine Luetkemeyer of Missouri, put it.
Luetkemeyer told Democrats and the assembled panelists, who support “safe harbor” legislation for banks to be able to accept deposits from cannabis businesses without fear of prosecution, that the measure contradicts federal law. That’s true, as cannabis remains classified in the most dangerous category of drugs, Schedule I, under the Controlled Substances Act.
Federal laws such as the Bank Secrecy Act prohibit banks from freely accepting cannabis-generated dollars, although a small number of banks and credit unions have chosen to do business with cannabis clients after the Treasury Department released guidance in 2014 that spelled out strict guidelines.
Luetkemeyer asked panelists whether they had contacted members of the Judiciary Committee, implying that the House subcommittee charged with oversight of financial matters had overstepped its bounds.
“The states have jumped the gun here,” Luetkemeyer said.
One of those states is his home state of Missouri, which legalized medical cannabis in November, joining more than half the states in the country.
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Democrats hope to address a status quo that has thousands of cannabis businesses operating in the gray area of state-federal conflict. Rep. Ed Perlmutter, a Democrat from Colorado, testified that cannabis businesses, their employees, contractors and customers face danger for interacting with state-legal businesses.
“If someone wants to oppose the legalization of marijuana, that’s their business,” Perlmutter testified. “But American voters have spoken and continue to speak. Prohibition is over.”
Perlmutter has sought to address the issue for years and circulated a draft of the SAFE Banking Act of 2019, which would provide banks “safe harbor” from federal prosecution if they accept money from state-legal cannabis operators. Republicans and the lone opposing panelist, securities lawyer Jonathan Talcott, with anti-legalization group Smart Approaches to Marijuana, said that as long as cannabis remains in the Controlled Substances Act, Congress cannot circumvent the Act.
Talcott is involved with SAM, he said, because his sister developed schizophrenia after using cannabis, and he echoed arguments from author Alex Berenson that legalization proponents have failed to address the psychological problems associated with cannabis. (Some of Berenson’s central claims have been disputed or debunked, including by a researcher involved in a key academic study who told Cannabis Wire Berenson had misinterpreted their work).
Banking experts and others called on to testify by the Democrats disagree that Congress couldn’t make a “safe harbor” fix. California State Treasurer Fiona Ma, Rachel Pross representing the Credit Union National Association, and Gregory Deckard representing the Independent Community Bankers of America all said that Congress should adopt a “safe harbor” for banks and bring needed oversight to all cash businesses.
Neill Franklin, a former police officer and the executive director of the Law Enforcement Action Partnership, which advocates for cannabis legalization, painted the picture of all cash businesses in stark terms.
Rep. Denny Heck, a Democrat from Washington, said of the killing and robberies, “today after six years we finally have a hearing, and it comes too late.”
Pross, who is the chief risk officer for Maps Credit Union, one of the few institutions that allow cannabis businesses to bank, cited a Wharton 2015 student blog post that suggested half of cannabis dispensaries had been robbed or burglarized that year.
Washington, D.C., dispensary owner Corey Barnette testified that Congress should act because “the current system creates a public safety disaster.”
Subcommittee chairman Gregory Meeks, a Democrat from New York, pointed to a map that showed nearly every state has moved ahead with legalization in some form. “Without having some uniformity, it creates a tremendous problem of uncertainty as well as safety,” he said. “It’s here, just as surely as alcohol was.”