Marijuana banking bill picks up momentum
Lawmakers are poised to send a bill to the House floor that would allow banks to provide services to legal marijuana businesses.
The House Financial Services Committee is slated to vote on the measure Wednesday, in what is seen as a turning point for industry groups who have long pushed for the legislation.
Similar legislation was first introduced six years ago, but in recent months the idea has gained bipartisan support and the backing of heavy hitters on K Street and in the business world who see it as essential to bringing a growing industry into the financial mainstream.
Financial Services Committee Chairwoman Maxine Waters (D-Calif.) is pushing ahead on the measure despite calls from the panel’s top Republican, Rep. Patrick McHenry (N.C.), to delay a vote to address conservative concerns. The issue is also one that has Waters on the same side as big banks, a group she has been a vocal critic of.
“We’re making progress with this legislation and marking it up this week is the appropriate thing to do. Let’s keep the process moving forward,” said Terry Holt, a spokesperson for National Cannabis Roundtable (NCR) and a partner at HDMK. The NCR, a prominent advocacy group for the legal pot industry, has pushed for the bill and boasts former Speaker John Boehner (R-Ohio) as honorary chairman.
But despite the optimism, the legislation will need to overcome several challenging hurdles before becoming law.
“You have this whole slew of issues that are out there, from the left, the right, the middle,” Michael Williams, founder of the Williams Group, told The Hill.
“On the left, this doesn’t go far enough,” he said, while on the right, “you have the Republicans who say we shouldn’t be doing this at all because it actually hints towards decriminalization.”
Federal law currently prevents financial institutions from banking for cannabis businesses. That leaves many businesses that are legal thanks to state laws unable to access banks and credit unions.
The SAFE Banking Act, introduced by Rep. Ed Perlmutter (D-Colo.) with 132 Democratic and 12 Republican co-sponsors, would allow banks to work with dispensaries, growers and other cannabis businesses, bringing traditionally cash enterprises into the financial system. Perlmutter first introduced similar legislation in 2013 and has offered bills in every Congress since.
The bill has some powerful groups backing it. This year, the American Bankers Association (ABA) came out in favor of the bill, urging Congress to clear up what is a confusing situation for banks.
“The American Bankers Association does not take a position on the legalization of cannabis, but the conflict between state and federal law is challenging for banks in communities that are encouraging them to bank cannabis-related businesses because of the public safety concerns that arise when they don’t have access to the banking system,” Ian McKendry, spokesman for the ABA, told The Hill. “The SAFE Banking Act would provide some clarity for banks operating in the 33 states that have legalized some form of cannabis.”
Joseph Lynyak, a partner at Dorsey & Whitney, said cutting out any gray areas is a priority for banks.
“Banks don’t like uncertainties, they like clear-cut, bright-line tests easily and correctly applied. I think we need to recognize the fact that, like it or not, this is now turning into an agriculture industry and we need to be treating it like that,” he told The Hill.
The pressure to pass the legislation is coming from a wide range of business groups.
The American Property Casualty Insurance Association (APCIA), an insurance industry group, says the bill is just a first step.
“[It ensures] the needed clarity for insurers that wish to provide financial services in states that have legalized marijuana,” Wesley McClelland, vice president of federal government relations at the APCIA, told The Hill. “We hope to continue working with the bill sponsors and supporters to address the larger set of issues that insurers face as more states look to legalize marijuana.”
The bill is expected to pass the committee on Wednesday, with K Street watchers predicting a House floor vote in May. Supporters say their priority is building support ahead of the House vote to give the bill momentum. The bill faces an uphill climb in the GOP-controlled Senate.
A spokesperson for Senate Banking Committee Chairman Mike Crapo (R-Idaho) declined to comment on the bill to The Hill last month on whether the panel would take up the bill. Idaho has not legalized cannabis.
“How much political capital is [Senate Majority Leader Mitch] McConnell going to want to expend on this? A lot of that is going to be dictated by how big the House vote is, quite frankly,” said Williams said.
“If it’s a squeaker, if you get 238 votes, I don’t think that sends a strong enough signal. But if you get 300 votes, that’s a little bit different,”
Lynyak said marijuana advocates may have to wait until after 2020 to see action in the upper chamber.
“The first year of the next administration, whether it’s Trump’s or somebody else’s, is when it can probably pass,” he said.
But Lynyak noted the bill could find some unlikely allies.
“McConnell was a lead figure in legalizing the growing and transportation of hemp, which indicates that there is certainly some movement on the Republican side,” Lynyak said. “Reform in this area may be something that could become bipartisan.”
He noted that GOP Sen. Cory Gardner (Colo.) is also a supporter of decriminalization.
Overcoming opposition from conservative lawmakers is a major challenge. They oppose the bill for a number of reasons, including the definition of “financial services.”
“The most important one is that the bill talks about being able to provide financial services to a cannabis company—but the definition of what is meant by ‘financial services’ is financial services being provided to a consumer as oppose to a commercial enterprise,” Lynyak said.
Also, banking with cannabis firms requires a great deal of time and expense to comply with rules. But Lynyak worries the bill would do little to loosen up existing regulations.
And there are questions about whether the bill’s safe harbor provisions, aimed at protecting investing in cannabis businesses, are broad enough.
The APCIA is teaming up with five other groups, including the American Land Title Association and the Council of Insurance Agents and Brokers, to back an amendment from Rep. Steve Stivers (R-Ohio) that would include insurers in the safe harbor provisions.
There are also concerns from the left, which wants the bill to take steps toward decriminalizing marijuana.
“On the left, you have members who say this is a half measure and we should be doing more,” Williams said. But he noted that those matters are outside the scope of the Financial Services Committee.
“It’s a weird juxtaposition because you’ve got Democrats who are making the argument that Republicans usually make on states’ rights and you’ve got Republicans who say well no, the federal government should be the decider in this because either its legal or it’s not.”
For now, supporters are looking to keep building momentum as the legislation moves ahead.
Holt said the NCR knows reform will take more than one bill.
“The roundtable was launched to tackle a number of cannabis reforms, and we’re not going to solve our problems in one piece of legislation,” he said.