LIFESTYLE CANNABIS
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Marijuana Banking in the Balance: Should Reform Be Incremental or Radical?
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BY JEAN-GABRIEL FERNANDEZ
ebate is raging as lawmakers are preparing to resolve their differences regarding the America COMPETES Act (HR 4521). This manufacturing bill includes the Secure and Fair Enforcement (SAFE) Act, which has been a hot-button topic for years, and which would grant equal protections to state-legal marijuana businesses and the financial institutions that are currently unwilling to work with marijuana. As the House passed the SAFE Act language but the Senate rejected it, despite approving the rest of the COMPETES Act, this difference must be resolved in a conference committee. Ahead of this, the American Bankers Association, representing banks and credit unions in every state, urged congressmen—in particular Republican senators, who are the major roadblock to the bill’s success—to pass the provisions of the SAFE Act. As they point out, the status quo of marijuana banking is not a sustainable solution. “The inability of the state-licensed cannabis industry to access safe and regulated financial services is a pressing concern for so many of our nation’s communities and the banks that serve them. With state-licensed cannabis businesses currently operating in 37 states and more states weighing legalization, we urge you to include the SAFE Banking Act in the compromise version of the COMPETES Act to address these critical issues as quickly as possible,” the American Bankers Association wrote in defense of reform.
THE PROBLEM WITH MARIJUANA BANKING Currently, lawful cannabis businesses, which exist in states that legalized marijuana, are facing an enormous burden because of their products’ illegal status in the eyes of the federal government. Banks do not do business with entities that partake in illegal activities. If they accept to work with federally banned marijuana businesses—and some banks do, albeit very few—they
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are opening themselves up to liability and potentially extreme consequences as facilitators of drug trafficking. As such, tens of billions of dollars in regulated and taxed marijuana sales cannot be processed by banking institutions. It is not just banks, but also insurance companies, retirement funds and all financial institutions that refuse to touch cannabis money, no matter how licit. Among other consequences, state-legal cannabis businesses often cannot accept anything other than cash payments. This can be seen even in marijuana-adjacent stores, such as ones selling delta-8 THC, a derivative product from the cannabis plant that can make you high but that is legal at both the state and federal levels; they are lumped in with businesses that deal in federally illegal but state-legal products. As a result of this artificial chokepoint of cash, cannabis businesses are priority targets for robberies, especially armed robberies. It reduces safety in neighborhoods with cannabis stores. It makes it difficult to keep books, it makes it difficult to pay employees and contractors, it makes it difficult to pay rent, and it even makes it difficult to pay taxes. The Internal Revenue Service (IRS) even publicly took the side of marijuana reform by launching a largescale effort to integrate marijuana businesses and by requesting swift action from Congress. Congress, naturally, failed to act. In 2019, then-Treasury Secretary Steven Mnuchin explained that the IRS had to build “cash rooms” in IRS locations to contain the literal heaps of cash paid in taxes by cannabis businesses. This is an inconvenience as well as a significant security risk for IRS offices and workers, Mnuchin explained to Congress in another call to change. “I hope this is something that [lawmakers] can work with on a bipartisan basis, there are people on both sides of the aisle that share these concerns,” he said. “The SAFE Banking Act is an urgently needed, and widely supported, bipartisan legislative solution to allow banks to handle the proceeds from state-licensed cannabis businesses and the accountants, skilled trades, landlords, law firms, and other service providers they rely upon for legal operations,” the American Bankers Association added to their statement. “Federal law prevents banks from banking cannabis businesses, as well as these ancillary businesses, without fear of federal sanctions. As a result, this industry is operating primarily in cash, which causes significant public safety concerns and undermines the ability of cannabis regulators, tax collectors, law enforcement and national security organizations to monitor the industry effectively.”
