Over Eight Hundred Banks File to Allow Cannabis Businesses, FinCEN Reports

Banking institutions are in a race to allow cannabis businesses ahead of imminent changes in the way cannabis is classified at the federal level, according to federal data. Cannabis remains prohibited at the federal level, but the U.S. Health & Human Services Department (HHS) recommendation to reclassify cannabis from a Schedule I to a Schedule III changes everything.

NORML reports that there’s a spike in the number of banking institutions that are filing to work with cannabis businesses as the fear of repercussions subsides. 

According to quarterly data provided by The Financial Crimes Enforcement Network (FinCEN),  a bureau of the United States Department of the Treasury, over 800 banks and credit unions have filed paperwork with the U.S. government acknowledging their relationships with licensed cannabis businesses.

FinCEN reports that 812 banks and credit unions reported that they are actively working with cannabis companies during the second quarter of the FY2023. That’s a record high since FinCEN first started tracking these numbers. It represents a significant rise from last year’s numbers, when they identified 553 banks—only 11 percent of all U.S. banks—and 202 credit unions.

FinCEN “issued guidance to clarify Bank Secrecy Act (BSA) expectations for financial institutions seeking to provide services to marijuana-related businesses (MRBs),” the report, which is available for download, reads. “This FinCEN guidance clarified how financial institutions can provide services to marijuana-related businesses consistent with their BSA obligations, and aligns the information provided by financial institutions in BSA reports with federal and state law enforcement priorities.”

FinCEN Types of Cannabis Businesses

“FinCEN’s 2014 Guidance specifies three phrases for describing a financial institution’s relationship to Marijuana-Related Businesses (MRBs) in SARs: 

  • Marijuana Limited:  means the financial institution provides financial services to an MRB that the financial institution reasonably believes, based on its customer due diligence, does not implicate one of the Cole Memo priorities or violate state law.  
  • Marijuana Priority:  means the financial institution provides financial services to an MRB that the financial institution reasonably believes, based on its customer due diligence, implicates one of the Cole Memo priorities or violates state law. 
  • Marijuana Termination: means the financial institution deems it necessary to terminate a relationship with an MRB in order to maintain an effective anti-money laundering compliance program.”

NORML leaders discussed the topic with The Hill last May.  

“No industry can operate safely, transparently or effectively without access to banks or other financial institutions and it is self-evident that the players in this industry (smaller and minority-owned businesses in particular), and those consumers that are served by it, will remain severely hampered without better access to credit and financing,” NORML Deputy Director Paul Armentano told The Hill.

According to survey data compiled last year by Whitney Economics, over 70% of cannabis businesses that were asked said that the “lack of access to banking or investment capital” is their top challenge. 

FinCEN’s Marijuana Banking Update from March 2022 shows a steady increase in the number of banks and credit unions filing to cater to cannabis businesses. “As of 30 September 2021, FinCEN had received a total of 219,097 SARs using the key phrases associated with MRBs. Several of the SARs contain more than one key phrase, which accounts for the numbers for each key phrase being greater than the total,” the report reads.

“FinCEN received 172,501 SARs from filers using the key phrase ‘Marijuana Limited.’ FinCEN received 15,359 SARS from filers using the key phrase, Marijuana Priority. FinCEN received 42,791 SARs from filers using the key phrase ‘Marijuana Termination’.”

FinCEN began providing guidance to cannabis businesses in 2014 with the goal to to help banking institutions operate while cannabis remains illegal at the federal level.

Why Banks Are Changing Their Tune

Yahoo! News reported earlier this month that HHSrecommendation to reclassify cannabis from a Schedule I to a Schedule III drug could transform the cannabis industry and create new opportunities for banking institutions.

“Rescheduling cannabis to Schedule III may allow dispensaries to accept credit card payments,” Richard Laiderman, former head of global treasury for VISA and Co-Founder and chair of StandardC, said. Credit card payments may supplant cash transactions if this occurs, reducing the risks and costs associated with cash-only operations.”

Cannabis banking expert Robert Baron said, “While changes will inevitably occur, financial institutions looking to serve this market segment must implement risk management tools to evaluate and monitor cannabis businesses. This is where StandardC’s business underwriting & monitoring tools are perfectly suited to meet their Bank Secrecy Act and customer due diligence obligations.”

The HHS recommendation to reclassify cannabis from Schedule I to Schedule III would be a pivotal step—the first of its kind at the federal level—to make the cannabis industry safer for everyone.

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Colorado Gov. Sends Letter to Commend Biden Administration for Making Progress on Rescheduling Cannabis

Colorado Gov. Jared Polis recently sent a letter to President Joe Biden on Sept. 5 regarding the U.S. Department of Health and Human Services’ (HHS) recommendation for the Drug Enforcement Administration (DEA) to reschedule cannabis from a Schedule I substance to a Schedule III substance.

According to The Gazette, Polis’ letter addressed this recommendation, and applauded Biden on leading an administration toward progress. “We are pleased to hear that you have recently received Health and Human Services’s (HHS) recommendation to move cannabis to Schedule III,” Polis began in his letter. “It’s about time.”

“This is an historic moment and we owe you and your administration a debt of gratitude for your leadership on catching up with where the science is,” Polis continued. “Cannabis’ current classification under federal law as a Schedule I drug is contradicted by the scientific evidence. The notion, as previously considered, that cannabis has no accepted medical use, a high potential for abuse, and no accepted safety standards even under medical supervision has been widely disproven, HHS’s recommendation is evidence-based and a move in the right direction.”

He continues that he offers his “enthusiastic support” while the country waits for the DEA to respond, but in the meantime, urges the president to begin thinking about what else needs to be done to make moving cannabis to Schedule III ideal for cannabis businesses. “I ask you to simultaneously consider a few next steps in the near future by showing your support for access to banking for the state-regulated marketplace, reduced criminal penalties for possession and distribution of cannabis, addressing immigration-related consequences and enforcement discretion from FDA,” Polis wrote.

Polis also addresses the issues that still need to be resolved, such as banking. He wrote that if cannabis becomes a Schedule III substance, banks would be free to serve cannabis businesses and that tax code 280E would no longer be necessary. “The most efficient way to address these public health risks is to displace the illicit marketplace and replace it with a legal, safe, regulated, and age-verified system,” Polis continued. “But we can only do that by promoting federal policies that allow for profitability in these well-established state-regulated marketplaces. That equates to [Internal Revenue Code] Section 280E reform and access to traditional banking services.”

Polis noted that rescheduling cannabis will become a hallmark accomplishment of Biden’s term as president. “Your administration will soon be credited with saving hundreds of thousands of jobs and significant tax revenue for the states when DEA solidifies FDA’s recommendation,” Polis writes. “While federal prohibition continues, more than three-fourths of the states have legalized medicinal marijuana, and more than 20 have legalized marijuana for adult use.”

“Let’s celebrate this progress and work together to finish the job,” his letter to Biden concluded. “We greatly appreciate your leadership, and please come visit Colorado again soon.”

Nearly a year ago on Oct. 6, 2022, Biden made a historic announcement to pardon of thousands of federal cannabis prisoners. He also called for the HHS secretary and the attorney general to “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law,” Biden said. “Federal law currently classifies marijuana in Schedule I of the Controlled Substances Act, the classification meant for the most dangerous substances. This is the same schedule as for heroin and LSD, and even higher than the classification of fentanyl and methamphetamine—the drugs that are driving our overdose epidemic.”

In response to Biden’s request last year, HHS Assistant Secretary for Health, Rachel Levine, sent a letter to DEA Administrator Ann Milgram on Aug. 29 regarding recommendations for moving cannabis into the Schedule III category. “Following the data and science, HHS has expeditiously responded to President Biden’s directive to HHS Secretary [Xavier Becerra] and provided its scheduling recommendation for marijuana to the DEA on August 29, 2023,” an HHS spokesperson said.

According to a statement provided to The Hill by a DEA spokesperson, it’s the DEA’s turn to review the recommendations. “As part of this process, HHS conducted a scientific and medical evaluation for consideration by DEA. DEA has the final authority to schedule or reschedule a drug under the Controlled Substances Act. DEA will now initiate its review,” the spokesperson said. It is unclear how long it will take for the DEA to review the recommendations, or how the department will respond.

The Controlled Substances Act of 1970 labeled cannabis as a Schedule I substance over 50 years ago. Schedule I substances currently include cannabis, heroin, LSD, ecstasy, and peyote, among others, which are described as having no medical benefits and a high potential for abuse. Schedule II substances also have high potential for abuse, but potentially lead to “severe psychological or physical dependence,” such as Vicodin, cocaine, meth, oxycodone, fentanyl, Adderall, and more. Schedule III substances however, are simply drugs with “moderate to low potential for physical and psychological dependence,” like ketamine and testosterone.

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Oregon Governor Rejects Cannabis Banking Bill

Oregon Gov. Tina Kotek recently rejected a bill that would have created a State Public Bank Task Force. The 19-person team would have studied the pros and cons related to a cannabis business banking solution in the form of a public bank and would have proposed recommendations for implementation. 

Chief sponsors included Rep. Mark Gamba, Rep. Jules Walters, and Sen. Jeff Golden, who introduced House Bill 2763 in January. The bill steadily made its way through the House and Senate and was passed by both by the end of June before it was vetoed by Kotek on Aug. 4.

In a press statement published on July 28 to cover her thoughts on “potential vetoes,” Kotek said that she took issue with HB-2763. “Reason for possible objection: While the Governor supports exploring the creation of a state bank, this bill has several logistical challenges, including directing the Oregon Business Development Department (OBDD), which already manages over 80 programs, to manage a new task force, establish an RFP process, and finalize a substantive report on an abbreviated timeline,” the notice stated.

Had HB-2763 been approved, it would have explored “potential benefits and harms from the bank to state and local jurisdictions and private industries,” as well as “governing and corporate structures for the bank” and other goals. Ultimately, the task force’s research would have served as a way to create a publicly controlled bank that would save public dollars, and “spur greater economic activity within this state.” The task force would have also provided a detailed report of its findings on or before September 2024.

Furthermore, both committees sought to “…analyze challenges and barriers to providing banking services to legal adult-use cannabis businesses and examine pathways to allowing banking services to the burgeoning cannabis industry in New York.”

Banking access for cannabis businesses is an issue nationwide, and other states have attempted to pass legislation to ensure the safety of cannabis business owners as well as further legitimize the industry.

In March 2022, Pennsylvania legislators Rep. John DiSanto and Rep. Sharif Street proposed a cannabis banking bill. “Access to financial and insurance services is essential for operating any business, and it is against the public interest to relegate a multi-billion-dollar industry to deal in piles of cash,” said DiSanto. “Banking this cash safely in Pennsylvania provides certainty for businesses, is a huge opportunity to grow our economy and should ultimately lower costs for medical cannabis consumers.” Former Pennsylvania Gov. Tom Wolf signed the legislation in July 2022.

Last October, Rep. Dan Donovan and former Indiana Pacers NBA athlete David Harrison proposed a banking solution called Token HiFi which would have offered a safe and reliable solution for cannabis banking services.

In December, the most recent attempt to get the Secure and Fair Enforcement (SAFE) Banking Act was introduced again, but it was left out of the National Defense Appropriations Act (NDAA). The Senate Majority Leader has led many efforts to get the bill passed, and although it has been met with opposition, progress continues to be made. “It’s a priority for me,” Schumer said about the bill last year. “I’d like to get it done. We’ll try and discuss the best way to get it done.”

At the time, Republican opponents such as Senate Majority Leader Mitch McConnell accused Democrats of including “unrelated” items in the defense bill. “Even now, House and Senate Democrats are still obstructing efforts to close out the NDAA by trying to jam in unrelated items with no relationship to defense,” said McConnell. “We’re talking about a grab bag of miscellaneous pet priorities—like making our financial system more sympathetic to illegal drugs, or the phony, partisan permitting-‘reform’-in-name-only language that already failed to pass the Senate this year.”

Earlier this year in May, the New York Assembly Standing Committee on Banks and the Assembly Standing Committee on Economic Development, Job Creation, Commerce, and Industry held a hearing to discuss its benefits. “Operating a cash-only business raises challenges including security, payroll, access to loan products, and recordkeeping,” the public hearing memo stated. “These challenges impact both the legal cannabis-related businesses and the banks seeking to provide services.”

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Week in Review: Mastercard Stops Cannabis Purchases in the US

In this week’s cannabis news round-up, MasterCard stops cannabis purchases with debit cards in the US; Nevada grants first conditional license for stand-alone cannabis consumption lounge; new study shows cannabis enhances ‘runner’s high’ and reduces pain during exercise and PAX introduces “My PAX” for customized vapes.

PHOTO Gracie Malley for Cannabis Now

Mastercard Stops Cannabis Purchases with Debit Cards in the US

Mastercard has told US banks to stop allowing cannabis purchases with its debit cards, citing the complex legal and financial issues faced by the cannabis industry, despite the increasing legalization of cannabis in many states.

In an official statement on Thursday, Mastercard clarified that the federal government considers cannabis sales illegal, leading the company to ban such purchases on its systems. Mastercard promptly notified financial institutions connected to cannabis merchants to terminate these activities in line with their policies.

“As we were made aware of this matter, we quickly investigated it,” the company said. “In accordance with our policies, we instructed the financial institutions that offer payments services to cannabis merchants and connects them to Mastercard to terminate the activity.”

Following Mastercard’s cease-and-desist letters, companies using PIN debit payments for cannabis are now searching for alternative solutions for dispensaries that rely on these services. The crackdown is expected to limit convenient payment options for cannabis consumers, leading them towards cash-based transactions. Due to the federal illegality of the plant, major banks and credit card companies have typically restricted cannabis transactions, leaving limited payment options for buyers in states where it is legal.

“This news, while extremely disappointing, doesn’t come as a surprise,” Wendy Bronfein, co-founder of vertically integrated Maryland operator Curio Wellness, says. “The cannabis industry notoriously lacks access to traditional financial resources. With the stalling of the SAFE Banking Act in Congress and now this Mastercard roadblock, it’s becoming increasingly apparent that something must be done on the federal level to lift these constraints.”

USA CBD Expo

Nevada Grants First Conditional License for Stand-Alone Cannabis Consumption Lounge

The Nevada Cannabis Compliance Board (CCB) has taken a significant step forward by granting a conditional license to the first independent cannabis consumption lounge. This approval opens the door for the launch of the first social-use cannabis lounges in the fall and marks a significant development in the Silver State’s cannabis industry.

The coveted license was awarded to La Lounge, LLC, who revealed plans to establish the lounge in Clark County, along with a restaurant. The exact location has not been disclosed yet.

Last year, the CCB issued prospective licenses for 40 cannabis consumption lounges linked to adult-use dispensaries. Recently, three dispensaries received conditional licenses from the CCB to proceed with opening their lounges.

New Study Shows Cannabis Enhances ‘Runner’s High,’ Reduces Pain During Exercise

A recent study reveals that cannabis is linked to an improved exercise experience, particularly for runners, making their runs more enjoyable and less painful. Researchers from the University of Colorado Boulder conducted a survey with 49 runners, asking them to rate their runs after using cannabis and without it.

Published in the journal Cannabis and Cannabinoid Research, the study found that participants reported “less negative affect, greater feelings of positive affect, tranquility, enjoyment and dissociation, and more runner’s high symptoms during their cannabis (vs. non-cannabis) runs.”

Although the runners were slightly slower after consuming cannabis, with a difference of 31 seconds per mile, the researchers noted that this change was not statistically significant. The study also revealed that participants experienced lower pain levels after their cannabis-infused runs, while the perceived exertion during both runs remained similar.

Photo courtesy of PAX

PAX Introduces My PAX Program for Customized Cannabis Vaporizer Devices

PAX is taking personalization to the next level, giving cannabis fans the chance to design devices that truly reflect their unique style and preferences with its latest initiative, My PAX. Building upon the success of the company’s in-store program, which has engraved tens of thousands of vapes, My PAX is now available online.

The artwork covers a wide range of themes to cater to various consumer trends and preferences, including cannabis culture, patterns and prints, Americana-style tattoo designs, mandalas, ‘90s culture, zodiac symbols, state pride and more.

“People are hungry for more personalized versions of their favorite products—a trend we’ve seen firsthand through successful artist and brand collaborations,” Luke Droulez, VP of marketing at PAX said. “Cannabis consumption is highly personal and a form of self-expression for many, so we’re thrilled to be launching a platform for creativity so that consumers everywhere can experience the magic of personalization and how it reflects their cannabis identities.”

One of the highlights of the launch is the exclusive library of custom designs created by the talented multi-hyphenate artist, Akiko Tsuji. The artist, ceramicist, editor, publisher and fashion designer has previously collaborated with PAX on a limited-edition collection. PAX intends to collaborate with other leading artists to introduce fresh perspectives and innovative designs for device personalization.

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Mastercard Announces Ban On Debit Card Transactions For Weed Purchases

Payment processing powerhouse Mastercard this week revealed the company is taking steps to prevent PIN-based debit card transactions for marijuana purchases, dealing a blow to a regulated cannabis industry already struggling with limited payment options for consumers.

On Wednesday, Bloomberg reported that Mastercard, the world’s second-largest payment solutions provider, had informed financial institutions and other payment processors to stop allowing marijuana purchases to be processed with debit cards. Because of tight federal restrictions on banks that do business with marijuana companies, even those legal under state law, most financial institutions decline to provide common banking services including credit card processing to such businesses.

In a statement, a spokesman for Mastercard said that the action was taken after it learned that cannabis dispensaries were accepting debit cards for pot purchases. 

“As we were made aware of this matter, we quickly investigated it,” the spokesman said. “In accordance with our policies, we instructed the financial institutions that offer payment services to cannabis merchants and connect them to Mastercard to terminate the activity.” 

“The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems,” the Mastercard spokesperson added.

Dispensaries Look For New Solutions

As Mastercard’s shutdown of debit card purchases for weed began to take hold last week, cannabis dispensaries that had been using the process began to look for new payment solutions. Peter Su, director of specialty banking at Hanover Bank, has headed cannabis banking programs and served as a payment processing consultant for the industry. He said that he began fielding calls about the situation last week and is hearing from even more companies this week.

“My phones are ringing off the hook — people are asking for payment alternatives,” Su said.

Last year, some of the largest processors of ATM transactions, such as NCR Corp.’s Columbus Data Services, shut down another payment processing system popular with dispensaries known as cashless ATMs that let consumers use their debit card to process a cash withdrawal, which would then be used to pay for cannabis. Tyler Beuerlein, chief strategic business development officer of Safe Harbor Financial Services, a company that provides banking and lending to cannabis businesses, said the crackdown on electronic payment options leaves few alternatives for licensed marijuana retailers to conduct business with their customers.

“More people have migrated to PIN debit in the last year and a half as the cashless ATMs have had issues. If the PIN debit solutions go away, it leaves people back with ACH or cash,” said Beuerlein.

But many consumers consider ACH (automated clearing house) payments, which require purchasers to share their bank account and routing number with the dispensary, to be cumbersome and potentially risky. And cannabis operators would prefer to limit the transactions conducted in cash, which can leave retailers open to robbery and other theft.

Industry Seeks Legislative Solution

A proposed federal legislative solution, the Secure and Fair Enforcement (SAFE) Banking Act, would give cannabis companies legal access to traditional business banking services including credit card processing. But while the bill has bipartisan support in both chambers of Congress and has been approved by the House of Representatives on seven separate occasions, it has yet to receive a vote in the U.S. Senate.

Matt Darin, the CEO of Curaleaf, one of the world’s largest cannabis companies by revenue, said that the news about Mastercard’s crackdown on debit transactions for cannabis purchases “illustrates once again the urgent need for the federal government to recognize the cannabis industry as the tax-paying, job-providing sector that it is.” 

“Our industry is one of the fastest-growing sectors in the U.S., generating more than $3.7 billion in state tax revenue in 2022 and employing over 428,000 Americans,” Darin wrote in an email to High Times. “Furthermore, cannabis is legal for medical purposes in 40 states, for recreational purposes in 23 states, and an overwhelming 88% of Americans say that cannabis should be legalized across the country. When will the laws catch up?”

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Senate Vote on SAFE Banking Act Likely Delayed Until Fall

A bill to give cannabis operators access to common banking services will not see a vote in the US Senate this summer, according to media reports, despite the hopes of Democratic leaders and businesses in the regulated marijuana industry.

Don Murphy, a lobbyist with the Marijuana Leadership Campaign, revealed on social media on July 20 that Ohio Democratic Sen. Sherrod Brown, the chair of the Senate Banking Committee, told him that the legislation, known as the Secure and Fair Enforcement (SAFE) Banking Act, wouldn’t receive a markup hearing this week as expected. Without the hearing, which gives lawmakers the opportunity to offer amendments to the bill, the legislation is unlikely to receive a floor vote in the Senate before the summer recess on July 31, delaying passage of the measure until this fall at the earliest. The Senate is slated to return from recess on September 5.

“Time to make early vacation plans Twitter friends,” Murphy tweeted on July 20 “Chairman Brown on the prospect of a #SAFEBanking vote, ‘Not next week.’”

If passed, the SAFE Banking Act would give cannabis businesses operating legally under state law access to traditional banking services by barring federal banking regulators from prohibiting, penalizing or discouraging financial institutions from providing such services. The bill provides similar protections for associated businesses providing services to state-legal cannabis operators, such as attorneys and property owners.

The legislation also prohibits federal banking regulators from terminating or limiting a bank’s federal deposit insurance because the bank is providing services to legal cannabis businesses. Regulators would also be barred from recommending or incentivizing banks to halt or reduce services to companies in the cannabis industry or taking any action on a loan to an owner or operator of a cannabis-related entity.

Cannabis Industry Operates Largely In Cash

Under current federal statutes, financial institutions that provide services to legal cannabis businesses face strict regulatory and reporting requirements put in place to prevent money laundering. As a result, few banks will serve the regulated cannabis industry and businesses are forced to operate largely in cash, making businesses, their customers and their employees more vulnerable to crimes, including armed robbery.

Originally introduced in 2019, the SAFE Banking Act also provides a safe harbor from criminal prosecution, civil liability and asset forfeiture for financial institutions that provide banking services to cannabis businesses, including the banks’ officers and employees. For the first time, the most recent version of the legislation extends similar safe harbor protections to Community Development Financial Institutions (CDFI) and Minority Depository Institutions (MDI), which serve underserved communities that face challenges in accessing capital and provide affordable access to financial services, to ensure they can also serve cannabis businesses.

Ohio Rep. Dave Joyce, the lead Republican sponsor of the legislation in the House, noted in a statement to Marijuana Moment on Thursday that his chamber of Congress “has passed the SAFE Banking Act seven times with strong bipartisan support.”

“I am disappointed to see continued delays in the upper chamber and strongly encourage my colleagues in the Senate to act swiftly on this critical legislation,” he added.

Ten-Year Anniversary of Cannabis Banking Legislation

Congress first considered legislation to give state-legal cannabis businesses access to banking services a decade ago with the introduction of 2013’s Marijuana Businesses Access to Banking Act from former Rep. Ed Perlmutter (D-CO). The legislation has strong bipartisan support in both houses of Congress but has failed to gain traction with leadership in the Senate after success in the House several times over the past decade.

“The ten-year anniversary of the first introduction of the SAFE Banking Act is an inauspicious one,” Morgan Fox, political director of the National Organization for the Reform of Marijuana Laws (NORML), said in a statement. “It’s frustrating that after such a long time—and after this narrowly-tailored commonsense reform has been repeatedly approved in the people’s chamber—its forward movement in the Senate remains in question.”

Brett Gelfand, the CEO Of CannaBIZ Collects, a cannabis collection agency representing more than 800 cannabis and CBD clients, said that the latest delay for the SAFE Banking Act will hinder the growth of the industry because most financial institutions will continue to refrain from providing banking services and extending credit to cannabis businesses. The ongoing lack of financial services could have further repercussions in the cannabis industry, he said, if the lack of capital causes cannabis businesses to curtail extending credit to each other.

“One unexpected upside of SAFE Banking not passing is that it might force the cannabis industry to finally tighten credit and collection policies,” Gelfand says. “As most banks won’t extend credit facilities to cannabis companies, it’ll force the companies to be more selective in who they offer trade credit to, and the terms under which they offer this credit. This hopefully will lead to better credit and collection policies across the board.”

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Did the US Government Inadvertently Just Fund the Cannabis Industry?

Although federal regulations make providing banking services to the legal cannabis industry a regulatory burden, some banks have opted to offer financial products to regulated cannabis businesses. One such institution was Signature Bridge Bank, which was seized by federal regulators earlier this year after suffering a liquidity crunch tied in part to investments in the cryptocurrency market.

On March 12, 2023, the New York State Department of Financial Services took possession of Signature Bridge Bank to protect depositors and appointed the Federal Deposit Insurance Corporation (FDIC) as the bank’s receiver. The FDIC, in turn, transferred all the deposits and nearly all the assets to Signature Bridge Bank, a full-service bank operated by the FDIC, while it looked for potential bidders for Signature Bridge Bank.

On March 19, the FDIC announced Flagstar Bank, a wholly-owned subsidiary of New York Community Bancorp, as Signature Bridge Bank’s acquiring institution for almost all deposits and some loan portfolios. Around $60 billion in loans remained in the FDIC receivership and the FDIC said it would cover about $4 billion in deposits related to digital banking assets.

Mina Mishrikey, head of the investment team at Merida Capital Holdings, a private equity firm investing exclusively in the cannabis and hemp industries, noted on the Alpharoot podcast that the seizure put the federal government in the business of providing financial services to the cannabis industry, despite the continued illegality of marijuana at the national level.

“The irony is that the US government is now banking cannabis, whether they know it or not, because they took over Signature Bank,” Mishrikey said.

Highlighting the Importance of the SAFE Banking Act’s Passing

Congress has returned its attention to a cannabis banking bill that would clear the way for financial institutions to provide banking services to marijuana businesses operating legally under state law. After being re-introduced in April, the Secure and Fair Enforcement (SAFE) Banking Act received its first Senate committee hearing in May. Senate leaders say the bill will face a vote in the committee soon and anticipate the legislation will advance to the Senate floor for further consideration.

First introduced in 2019, the SAFE Banking Act has been approved by the House of Representatives seven times but failed to advance in the Senate each time. The latest version of the bill was introduced again in the House for the 118th Congress on April 27 by Rep. Earl (D-OR) and Rep. Dave Joyce (R-OH). Companion legislation was introduced in the Senate on the same day by Sen. Jeff Merkley (D-OR) and Sen. Steve Daines (R-MT). The bill enjoys strong bipartisan support in both chambers of Congress, with more than three dozen senators and eight members of the House signed on as co-sponsors.

Under current federal rules, financial institutions that provide services to legal cannabis businesses face strict regulatory and reporting requirements put in place to prevent money laundering. As a result, few banks will serve the regulated cannabis industry and businesses are forced to operate largely in cash, making businesses, their customers and their employees more vulnerable to crimes, including armed robbery.

“As it stands, the federal government has denied state-legal cannabis companies the same access to financial services as every other legal business across the Buckeye State and our country,” Joyce, co-chair of the Congressional Cannabis Caucus, said in a statement when the bill was re-introduced in Congress. “Not only does this distort the market in a growing industry, but it also forces businesses to operate in all cash, making them and their employees sitting ducks for violent robberies. The bipartisan SAFE Banking Act will allow cannabis businesses to operate legally without fear of punishment by federal regulators, making our communities safer.”

The SAFE Banking Act would protect banks that choose to offer financial services to cannabis companies operating legally under state law by preventing federal banking regulators from prohibiting, penalizing or discouraging such services. The bill provides the same protections for associated businesses providing services to state-sanctioned cannabis businesses such as attorneys and landlords. The legislation also prohibits federal banking regulators from terminating or limiting a bank’s federal deposit insurance because the bank is providing services to legal cannabis businesses and from recommending or incentivizing banks to halt or reduce services to companies in the cannabis industry or taking any action on a loan to an owner or operator of a cannabis-related enterprise.

The cannabis banking bill also provides a safe harbor from criminal prosecution, civil liability and asset forfeiture for banks that provide financial services to cannabis businesses, including the banks’ officers and employees. For the first time, the latest version of the legislation extends similar safe harbor protections to Community Development Financial Institutions (CDFI) and Minority Depository Institutions (MDI), which serve underserved communities that face challenges in accessing capital and provide affordable access to financial services, to ensure they can also serve cannabis businesses.

“Montanans should be able to conduct their small business without fearing for their safety,” said Daines. “My bipartisan bill would provide the security and peace of mind that legal Montana cannabis businesses need to freely use banks, credit unions and other financial products without a fear of punishment. This bill will help keep our Montana communities safe, keep crime off the streets, support Montana small businesses and bolster local economies.”

The SAFE Banking Act is supported by dozens of state attorneys general, trade groups for the banking and insurance industries and leading labor unions including the International Brotherhood of Teamsters.

SAFE Banking Act Gets First Senate Committee Hearing

In May, the Senate Banking, Housing and Urban Affairs Committee held a hearing on the SAFE Banking Act, marking the first time the legislation was taken up by a Senate legislative panel. Although the committee did not vote on the bill, the senators on the panel heard testimony in favor of the cannabis banking bill from labor leaders and representatives of the cannabis and banking industries.

“The cannabis landscape looks far different than it did a few short years ago,” Senate Banking Committee chairman Sherrod Brown (D-OH) said in his opening remarks for the hearing. “Cannabis has been legalized or decriminalized in almost every state. States and localities have established licensing and social equity programs to ensure that small businesses and communities impacted by the War on Drugs are part of the growing legal cannabis industry.”

“Banking, of course, is critical for small cannabis businesses who already face hurdles getting their businesses off the ground,” he added. “I’m glad we’re building on the progress we’ve made over the years. I look forward to continuing these conversations.”

After the hearing, Senate Majority Leader Chuck Schumer (D-NY) said that he hoped to continue progress on the bill, saying the committee hearing was a “big step” for the legislation. The majority leader added that he expects the Banking Committee to advance the bill to the Senate floor for consideration.

“We’ve made a lot of good, bipartisan progress on SAFE Banking last Congress, and after today’s hearing we hope there will be a markup on this bill in the near future,” Schumer said after the hearing. “We’re really moving forward in a record way on a very important issue.”

With more comprehensive legislation to legalize marijuana at the federal level unlikely to pass during the current legislative session, some lawmakers including Schumer, would like to see restorative justice provisions that address the harms caused by years of marijuana prohibition added to the SAFE Banking Act. Topping the list is measures to expunge records of past minor marijuana offenses, building on pardons granted by President Joseph Biden last year. Schumer added that Congress has a “moral responsibility” to repair the harms inflicted by the failed War on Drugs. Last year, legislation that paired the cannabis banking bill with restorative justice provisions dubbed Safe Banking Plus was considered in Congress, but the measure failed to advance.

Merida Capital Holdings’ Mishrikey sums it up: “Whether the SAFE Banking Act passes during this congressional term or not is open for debate; but the irony is the federal government, at least temporarily, was itself a bank for the industry.”

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Colorado Legalizes Online Cannabis Sales

Colorado Gov. Jared Polis last week signed legislation to legalize online cannabis sales, ending the prohibition on internet shopping enacted following passage of the state’s landmark 2012 ballot measure that legalized adult-use cannabis. The measure, House Bill 1279, which was signed by the governor on June 1 after being passed by Colorado lawmakers last month, repeals a regulation that specifically prohibited online cannabis sales while establishing regulations for internet sales of licensed cannabis products.

Under the law, adults 21 and older will be able to shop for cannabis products and place orders online, although customers will be required to pick up their purchase in person. The legislation requires retailers to verify the name and age of online customers, who’ll be required to provide matching valid identification when the purchase is picked up. Cannabis retailers will also be required to furnish internet shoppers with “digital versions of all warning or educational materials that the retail marijuana store is required to post and provide on its licensed premises,” and consumers will have to “acknowledge receipt” of the materials before the transaction is completed online, according to a report.

Online Cannabis Sales Limit Cash Handling

While the bill was being considered by lawmakers in the Colorado legislature, Sen. Kevin Van Winkle (R-CO) said that the legislation would make cannabis retailers less reliant on cash to operate their businesses.

“What the bill mainly aims to do, from my perspective, is reduce cash in the marijuana space, which is something that’s exceedingly important to do because when there’s a tremendous amount of cash in any industry, it can lead to some troubling outcomes—specifically things such as robbery,” Van Winkle told his colleagues in the Colorado Senate last month. “It sets them up for a tremendous amount of potential theft and other things.”

Rep. Said Sharbini (D-CO), one of the sponsors of HB 1279, said that he hopes that the legislation will help advance Colorado’s legal cannabis industry.

“It’s to prevent a barrier for transactions; it’s to help businesses make sure that they can take these funds in so they’re not all cash businesses and that there are banks that are opening up to functions with them,” Sharbini said earlier this year. “Regulations are opening up across the country and we need to be competitive as well so this is a step in that direction to try and make sure that we can facilitate better business.”

Liz Zukowski, policy and public affairs manager for Native Roots, one of Colorado’s largest cannabis dispensary chains, notes that the state temporarily approved online shopping for cannabis products in 2020 as part of executive orders issued by Polis in response to the Covid-19 pandemic. The temporary authorization expired in 2021, and later that year, a bill that would have permanently authorized online cannabis sales failed to gain the approval of lawmakers, including some who were concerned that internet sales would increase access to cannabis by young people. However, the bill also contained provisions to allow telemedicine appointments for medical marijuana recommendations, which Zukowski believes made the legislation even less palatable to legislators.

“The online sales prohibition was put on hold, and we operated as a state with little to no incidents. That bill in 2021 was more than just online sales,” she told Westword as the bill was being considered in the Colorado state legislature. “It also had telemedicine as part of it, and I believe that was part of what got wrapped in the discussion. Telemedicine is not part of this bill.”

In addition to the safety issues surrounding cash sales at dispensaries, Zukowski also says that the bill permitting online cannabis sales will make shopping more convenient for consumers.

“The most obvious reason is that we’re in 2023, and customers want to be able to have access to e-commerce solutions. The cannabis industry has been held back from that,” she said. “And whatever we can do to lessen that reliance on cash would limit the risk of burglaries and robberies.”

Cannabis Industry Operates Largely In Cash

Supporters of the online sales bill note that the cash-dominant economy of the regulated cannabis industry continues because of the failure of Congress to pass the Secure and Fair Enforcement (SAFE) Banking Act or similar legislation that would allow banks to provide traditional business financial services to regulated cannabis companies. Under current federal regulations, providing cannabis businesses with financial products, including payroll and deposit accounts, credit card processing services and loans is subject to strict regulations. Because of the rules and onerous reporting requirements, most banking services are unavailable or costly for licensed businesses, and many financial institutions avoid serving the cannabis industry entirely.

In written testimony to the US Senate on the SAFE Banking Act, Paul Armentano, the deputy director of the National Organization for the Reform of Marijuana Laws (NORML), warned that the cash-only nature of the retail cannabis industry makes “businesses more susceptible to theft and more difficult to audit. It also places the safety and welfare of their customers at risk, as patrons must carry significant amounts of cash on their persons to make legal purchases at retail facilities. Similarly, it needlessly jeopardizes the safety of retail staffers, who are susceptible to robbery.”

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Congressional Lawmakers Optimistic About Bipartisan Cannabis Banking Bill

A bipartisan group of US lawmakers has reintroduced legislation to give legal cannabis companies improved access to banking services routinely used by other businesses across the nation. The bill, the Secure and Fair Enforcement (SAFE) Banking Act of 2023, was refiled in the Senate late last month by Democratic Sen. Jeff Merkley of Oregon and Sen. Steve Daines, a Republican from Montana. Republican Rep. Dave Joyce of Ohio and Oregon Democratic Rep. Earl Blumenauer filed a companion bill in the House of Representatives, where previous versions of the legislation have passed seven times.

Because of the continued illegality of marijuana at the federal level, cannabis companies operating legally under state or tribal law often have difficulties obtaining traditional banking services such as payroll accounts and credit card transaction processing. Banks and credit unions that choose to do business with cannabis companies must follow strict regulations and take the risk of facing prosecution under drug and money laundering laws for noncompliance. As a result, the regulated cannabis economy is conducted largely in cash, leaving businesses, employees and customers vulnerable to crimes including armed robberies. The sponsors of the legislation also note that businesses operating in an all-cash economy pose a greater risk of tax evasion.

“This legislation will save lives and livelihoods. It’s past time that Congress addresses the irrational, unfair and unsafe prohibition of basic banking services to state-legal cannabis businesses,” Blumenauer, founder and co-chair of the Congressional Cannabis Caucus, said in a statement on April 26. “The House has passed the SAFE Banking Act on a bipartisan basis seven times. I’m delighted that the Senate is joining us in making it a priority.”

Bill Protects Banks That Serve the Cannabis Industry

If passed by Congress and signed into law by President Biden, the SAFE Banking Act would prevent federal banking regulators from prohibiting or restricting a bank from providing services to a regulated cannabis business operating legally under state law. The same protections would also apply to banks that serve other businesses associated with the regulated cannabis industry, such as attorneys and the owners of commercial rental properties. Federal banking regulators would also be barred from terminating or limiting a bank’s federal deposit insurance primarily because the bank is providing services to a state-sanctioned cannabis business or associated business.

“As it stands, the federal government has denied state-legal cannabis companies the same access to financial services as every other legal business across the Buckeye State and our country,” Joyce said, who also serves as co-chair of the Congressional Cannabis Caucus. “Not only does this distort the market in a growing industry, but it also forces businesses to operate in all cash, making them and their employees sitting ducks for violent robberies. The bipartisan SAFE Banking Act will allow cannabis businesses to operate legally without fear of punishment by federal regulators, making our communities safer.”

Additionally, the SAFE Banking Act prevents regulators from taking any action against a loan to the owner or operator of a cannabis business and from recommending or providing incentives to banks to halt or downgrade services to legal cannabis businesses. The legislation also creates a safe harbor from criminal prosecution, liability and asset forfeiture for banks and their officers and employees who provide financial services to legitimate, state-sanctioned cannabis businesses, and the right not to provide such services would be maintained. The latest version of the bill, which has been revised slightly compared to previous iterations, also extends the safe harbor protections to Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) that make commercial loans to minority-owned businesses, according to a report.

Legislation Approved Seven Times in the House

Previous versions of the SAFE Banking Act have been approved by the House of Representatives seven times, but the Senate has failed to bring the bill up for a vote under both Republican and Democratic leadership. Last year, Democratic leaders offered an enhanced version of the legislation known as SAFE Banking Plus that also contained provisions to expunge past federal convictions for marijuana-related offenses, but that bill also failed to advance. Democratic leaders hope the version introduced last month without the expungement provisions will gain a hearing in the Senate Banking Committee before advancing to the floor.

“Forcing legal businesses to operate in all-cash is dangerous for our communities; it’s an open invitation to robbery, money laundering, and organized crime—and it’s way past time to fix it,” said Merkley. “For the first time, we have a path for SAFE Banking to move through the Senate Banking Committee and get a vote on the floor of the Senate. Let’s make 2023 the year that we get this bill signed into law so we can ensure that all legal cannabis businesses have access to the financial services they need to help keep their employees, their businesses, and their communities safe.”

The SAFE Banking Act of 2023 has broad support in both chambers of Congress. In addition to the primary sponsors, the legislation has the support of 38 additional co-sponsors in the Senate, including five Republicans. In the House, the bill has eight additional co-sponsors, evenly split among Democrats and Republicans. The bill has been referred to the Senate Banking Committee for consideration, as well as three committees in the House.

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Ten Ways Cannabis Can Revive a Depressed Economy

An economic winter is coming, but don’t worry; we’ve compiled ten ways cannabis can revive a depressed economy. When many people hear “cannabis,” they may think of it as a recreational activity or a medical necessity. And it is. But it’s more than that. So while politicians will inevitably announce “stimulus” and bailouts, the real solution will come from entrepreneurs in a free market. And since Canada has already legalized cannabis, that’s one hurdle out of the way. Next, cut […]

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