Researchers from the Congressional Research Service acknowledge that state-legal marijuana businesses are “heavily dependent on cash transactions” and are therefore “a target for theft”. They also question whether lawmakers should pass legislation to protect banks that serve the industry, “when other cannabis market participants continue to face prosecution under federal law.”
Experts examined the unique financial problems that plague the cannabis industry in a report published on Tuesday by the Congressional Research Service. They also discussed a possible bipartisan solution, the Secure and Fair Enforcer Regulation (SAFER Banking Act).
CRS stated that “Most states have legalized cannabis, but it is still a Schedule I controlled drug under federal law.” As a result, growing, selling, or possessing the drug is a federal offense. This disparity can have implications for banks that offer financial services to cannabis companies that are legal according to state law.
The report stated that “potential penalties for [anti money laundering] violations and violations of federal laws leave some banks hesitant to offer financial services to cannabis business operating in compliance with the state law.” If cannabis businesses cannot access traditional financial services they could face higher borrowing rates and be reliant heavily on cash transactions. This makes them an easy target for theft.
CRS noted that in September last year , the Senate Banking Committee had passed the SAFER Banking Act . However, the measure has not yet been voted on by the Senate. The House has passed earlier versions in some form seven times during recent sessions.
It said that the bill, among other things would prevent regulators penalizing banks for only offering banking services to businesses operating in compliance of state law. It would also protect the Fed, its employees, and banks that serve cannabis businesses in compliance with state laws by providing payment services. The Fed could accept cannabis firm loans as collateral for the discount window.
also outlined three issues in the report that they advise lawmakers to consider:
- Should businesses that engage in activities that are legal under state law but illegal under federal law be able to access banking services?
- Has federal banking barriers hurt cannabis businesses? These barriers have they been effective in deterring the use of marijuana that is legal under state law?
- Is it justified to provide a legal safe harbour to banks that offer services to cannabis businesses in the absence of a reformation of federal cannabis laws on a larger scale? Should banks be given special legal protection, if other cannabis market participants continue to face prosecution under federal law.
Chuck Schumer, Senate Majority leader (D-NY), said late in December that the lawmakers would “hit the ground” running in 2024. He hoped to build upon bipartisan progress in several key areas, such as marijuana banking reform, though he acknowledged it “won’t be easy.”
It’s likely that the SAFER Banking Act will be amended if it makes it to the Senate floor in this year. Schumer, for example, has talked about the “moral obligation” to further amend it in order to add provisions on state legal cannabis expungements as well as gun rights for cannabis users.
A survey conducted late last year found that 71 percent top Capitol Hill staff believe it is “unlikely”, that lawmakers will pass any kind of cannabis reform in the 118th Congress, which ends at this time next.
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