Banking Cannabis-Related Businesses: Pressure Mounts in Congress (Part 2)
On April 25, NAFSA published an article stating that pressure was mounting for Congress to act on cannabis legislation. At the time, 24 state regulators wrote a letter urging Congress to allow state-chartered banks to work with marijuana-related companies. A second letter, this time by 38 State AGs, went to Congress on May 8, urging Congress to “allow states and territories that have legalized certain use of marijuana to bring that commerce into the banking system.”
According to the letter, 33 states and several U.S. territories have legalized marijuana for medical purposes. In contrast, the use of marijuana, for medical reasons or otherwise, remains illegal under federal law. This creates a problem for banks looking to service these businesses, which may subject them to criminal and civil liability under the federal Controlled Substances Act and other federal banking statutes.
As a result, the marijuana industry, which reached $8.3 billion in sales in 2017, is unable to deposit revenue into bank accounts and are forced to use cash in their stores. With experts predicting sales to grow to $25 billion by 2025, these businesses might see an uptick in criminal activity as cash piles up in stores.
“The resulting grey market makes it more difficult to track revenues for taxation and regulatory compliance purposes, contributes to a public safety threat as cash-intensive businesses are often targets for criminal activity, and prevents proper tracking of billions in finances across the nation,” the letter states. “The reality of the situation requires federal rules that permit a sensible banking regime for legal businesses.”
To solve the problems for banks and the marijuana industry, the 38 state AGs are asking Congress to pass the SAFE Banking Act that would provide a safe harbor for certain financial institutions to provide banking services to marijuana-related businesses located in U.S. states or territories that have legalized its use.
“Our banking system must be flexible enough to address the needs of businesses in the various states and territories, with state and territorial input, while protecting the interests of the federal government,” states the letter. “This includes a banking system for marijuana-related businesses that is both responsive and effective in meeting the demands of our economy.”
The Financial Services Committee advanced the SAFE Banking Act on March 28 by a 45-15 vote, making it likely to get a vote on the House floor sometime this year.