A House Financial Services subcommittee is set to hold a hearing examining access to banking services for cannabis-related businesses.
“We’re trying to examine how outdated banking regulations on the federal level are hindering reform on the state level when it comes to marijuana,” said Democratic Congressman Gregory Meeks, chairman of the Consumer Protection and Financial Institutions subcommittee. “Hopefully, the hearing will allow us to ascertain what steps we can take to encourage economic growth and public safety in that space.”
More than 30 states have legalized some form of cannabis use, but it is still federally prohibited -- making banks hesitant to serve legal cannabis-related businesses.
The American Bankers Association (ABA) says even in the “climate of non-enforcement” the majority of financial institutions “will not take the legal, regulatory, or reputational risk associated with banking cannabis-related businesses without congressional action.”
“It creates a huge barrier for other entrants coming into the marketplace,” said Rachel Pross, Chief Risk Officer of Maps Credit Union. Maps Credit Union is based in Oregon, where medicinal and recreational marijuana is legal.
Pross is scheduled to testify in the hearing on behalf of the Credit Union National Association (CUNA). In an interview with Yahoo Finance, Pross said Maps started serving the cannabis industry, in part, because of the community safety issue.
“Anytime you have a cash-based industry you’re going to have an increased risk of crime in the community – theft of local businesses,” said Pross, “We serve the whole chain from retailers to growers to laboratories, processors. And in just the last two years we’ve taken in over $500 million in cash off the streets.”
Pross noted the cash is not stored in the branches.
The SAFE Banking Act
On Wednesday, the subcommittee will discuss the Secure and Fair Enforcement Banking Act of 2019, also known as the SAFE Banking Act.
Democratic Rep. Ed Perlmutter of Colorado introduced a version of the bill last year. Perlmutter is set to testify before the subcommittee on Wednesday.
According to a discussion draft, the proposal would keep federal banking regulators from discouraging, prohibiting, or penalizing depository institutions from serving marijuana-related legitimate businesses.
A hearing memo says the bill would make “depository institutions and their employees exempt from federal prosecution or investigation solely for providing banking services to a state-authorized cannabis-related business.”
“Removing the risk of criminal prosecution simply for banking an industry that is legal in our state – that is a huge step forward in the right direction,” said Pross.
The American Bankers Association submitted a statement to the House Financial Services Committee ahead of the hearing. The ABA said the conflict between state and federal law puts banks in a “difficult situation” and the discussion draft of the SAFE Banking Act would be a good first step toward solving the problem.
“Simply excluding legal state cannabis activity from the banking sector has not prevented the growth and spread of this industry, but providing access to the banking system could help facilitate public safety, streamline tax payments, and enable effective oversight in the states where voters have chosen to embrace cannabis legalization,” the statement read in part.
The ranking member of the subcommittee, Republican Congressman Blaine Luetkemeyer of Missouri, told Yahoo Finance Congress is “getting the cart before the horse.”
Luetkemeyer argues federal marijuana laws need to either be enforced or changed.
“I can’t go out here and support a law that’s in conflict with another law...it doesn’t make sense,” said Luetkemeyer. “You can’t live in limbo here, which is where we’re at right now. You can’t have laws in conflict with each other.”
While Luetkemeyer did not advocate for decriminalizing marijuana, he said that issue should be addressed before banking services.
“If you want to get to the point where you can sell marijuana, you have to fix the legality part of it. Whether you want to have just the medicinal portions of it to be fixed or you want to do recreational and have the drug be completely legal...that’s up for discussion,” said Luetkemeyer. “Once you decide whether you want to...how you want to deschedule it, and then at that point you can work on the banking portion of it.”
Also set to testify at the hearing: the California State Treasurer; Law Enforcement Action Partnership; State Bank Northwest CEO; the owner of the District Growers Cultivation Center & Metropolitan Wellness Center; and a partner at the law firm Nelson Mullins.
Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.