The cannabis banking conversation is officially underway in Congress, just weeks after the SAFE Banking Act was reintroduced in late April.
On Thursday, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing titled “Examining Cannabis Banking Challenges of Small Businesses and Workers,” which focused on the obstacles that small cannabis business owners and workers must face as a result of banking access hurdles. The conversation about cannabis banking on Thursday was framed a bit differently, depending on who was speaking: public safety, equity, workers’ rights, public health, or all of the above.
The people who testified represented a wide spectrum of experiences and opinions: Sens. Jeff Merkley and Steve Daines, the two sponsors who reintroduced the standalone legislation last week, as Cannabis Wire reported; Cat Packer, vice chair of the Cannabis Regulators of Color Coalition; Kevin Sabet, president and CEO of Smart Approaches to Marijuana; Ademola Oyefeso, international vice president of UFCW; and Michelle Sullivan, chief risk & compliance officer for Dama Financial.
Committee Chair Sherrod Brown outlined some of the biggest issues that members of Congress hope the Act might resolve. Small business owners already have a tough time getting their business off the ground, but when they must work with a third party vendor for banking services, already slim margins become razor thin. Workers face issues trying to get a mortgage because they’re paid in cash and can’t prove their incomes. Storefronts are increasingly targets of robberies, sometimes armed.
“The effects of this patchwork system go beyond just the cannabis industry. Sheet metal and air conditioning contractors build service retail locations and other facilities. Lawn care and gardening companies like Scotts Miracle-Gro in central Ohio sell materials and equipment. They want to continue their businesses. They want to serve their customers. They don’t want to worry that will put their bank accounts at risk,” Brown said during the hearing. “While small businesses and workers deal with these challenges, large cannabis companies are the ones dominating the market.”
The SAFE Banking Act has cleared the House seven times. But if the SAFE Banking Act was a runner, the Senate has created insurmountable hurdles; the bill has never passed in the Senate in any form.
It’s unclear if that will change in 2023, though the SAFE Banking Act has 40 bipartisan sponsors. The bill has also drawn diverse and intense interest from the cannabis industry, and major industries outside of cannabis, from insurance to big banks.
Substantial negotiations put the Act closer than ever before to the finish line in December. But the required 60 votes in the Senate stalled the Act in its tracks.
That’s where the baton is picked up this May. The strategy laid out by Merkley is to get the SAFE Banking Act through the Senate Banking Committee and then to a floor vote. In the process, the bill is expected to be amended to add both the Harnessing Opportunities by Pursuing Expungement Act (HOPE Act), which would allocate funding for states pursuing expungements of cannabis offenses, and the Gun Rights And Marijuana Act (GRAM Act), which would extend Second Amendment protections to legal cannabis consumers.
The HOPE and GRAM Acts became part of the negotiated package in December, referred to as SAFE Banking Plus. On Thursday, following the hearing, Sen. Majority Leader Chuck Schumer and Sens. Cory Booker and Ron Wyden released a joint statement noting that they plan to add the expungement language to the bill.
Over time, the SAFE Banking Act has been positioned in different ways, including as a public safety bill. In March, Sen. Steve Daines of Montana spoke to a room of bankers at the American Bankers Association (ABA) Washington Summit. Daines pushed people to educate colleagues about the SAFE Banking Act, and to build coalitions with members of law enforcement, including sheriffs and attorneys general.
Daines, who said that he does not support federal legalization, reiterated that focus on public safety during the Thursday hearing.
“The people in states across this country have spoken, and it’s abundantly clear that the status quo is not only untenable, it’s very dangerous,” Daines said. “The SAFE Banking Act is a common sense bill that can and should pass and would immediately improve the public safety threats we’re seeing on the ground in our states.”
The public safety conversation with regard to the Act picked up steam last year, after violent robberies at cannabis shops happened with greater frequency. Officials from across the country have called for passage of the Act as a solution to this violence at cash-heavy cannabis businesses that are seen as sitting ducks.
“The SAFE Banking Act would help address a major cause of this increase in violent crime by providing a safe harbor for depository institutions and service providers to transact with state sanctioned marijuana businesses,” Daines said. He added that allowing cash from legal regulated cannabis businesses to be processed by banking institutions will help members of law enforcement more “easily distinguish legitimate actors” and help them refocus their energy on unregulated operators.
Sabet, who opposes cannabis legalization, said that he was “surprised” that of the many substance-related issues that could be discussed in Congress, SAFE Banking made the cut.
“The idea that this committee decided to spend its time turbocharging the marijuana industry right now, given everything else going on, I think is unfortunate,” Sabet said.
Oyefeso, of UFCW, gave some examples of the hardships that the lack of banking services causes for workers in the cannabis industry. For example, a pharmacist at a cannabis dispensary might be paid nearly $70 an hour and go home with $2,000, which turns workers themselves into targets for theft.
And, it’s tough just to find services for personal banking, Oyefeso said.
“Without a bank that will accept their paycheck and proof of employment like a pay stub, cannabis workers struggle to purchase homes and often find themselves having to pay higher mortgage rates, even though they work in a perfectly legal profession in their state,” Oyefeso said. “The lack of banking makes it difficult to get personal loans for homes and cars as well.”
Sullivan has a long professional track record of working in risk compliance, and called for the SAFE Banking Act to be “stronger and encompass a more stringent statutory framework.”
Sullivan specifically called for a “tougher framework” than the existing guidance, which she said should include enhanced rules on areas like risk limits, deposit ratios, due diligence, and ongoing monitoring requirements, “especially as it pertains to cash deposits and legacy cash.”
“We also believe that there is a serious potential for confusion in the banking industry following the passage of this legislation, the way it’s currently written. Will the cash truly get out of the system?” Sullivan asked. “We do know that credit card companies have policies against banking illegal products which may prohibit cannabis transactions running across those rails, even after the SAFE Banking Act passes. Without solving the larger decriminalization issue, we worry the passage of the SAFE Banking Act alone could actually provide worse problems and a sense of resolution, while huge conflicts at the federal level still exist.”
Sullivan suggested a “pause” so Congress can study these issues, among others.
Sen. Elizabeth Warren went in the other direction, calling for the passage of the SAFE Banking Act as a “critical step” in the move toward broader cannabis reforms.
“As long as marijuana remains criminalized federally, we’re not fully fixing the problem. If people can still get busted for purchasing marijuana, many banks will find it too risky to serve legal cannabis businesses no matter whether we tell them it is technically okay,” Warren said.
Warren referenced the ongoing federal review of how the federal government classifies cannabis, which President Joe Biden directed the U.S. Departments of Health and Human Services and Justice to conduct in October. Warren asked Packer more pointedly about decriminalization.
“Would fully decriminalizing marijuana at the federal level help ensure that small businesses get full access to safe, formal financial services?” Warren asked.
“Yes, it would certainly help. The reality is that even with the safe harbor, many financial institutions are likely to continue to view the industry as risky due to its Schedule I status,” Packer said. “The only way to eliminate the criminality of small businesses and workers is to completely remove cannabis from the controlled substances schedule.”