It’s time for the Senate to advance cannabis banking reform

Sen. Mike Crapo (R-Ind.) recently outlined his opposition to House-passed legislation — HR 1595: The SAFE Banking Act — permitting banks and other financial institutions to partner with state-licensed cannabis businesses. As Chairman of the Senate Banking Committee, it is imperative he rethinks this position.

The passage of this banking reform legislation is vital because an estimated one-quarter of the U.S. population now lives in a jurisdiction where state statutes legally regulate the retail sale of cannabis products to adults. 

According to data compiled by the Institute on Taxation and Economic Policy, tax revenues from adult-use marijuana sales in 2018 topped over $1 billion. Also, 33 states regulate the retail sale of medicinal cannabis products and formulations to qualified patients.

These commercial markets are not going away; they are growing larger. For instance, on Jan. 1, 2020, Illinois will begin permitting licensed retailers to sell marijuana to those ages 21 or older. 

Nonetheless, there remains a significant and unnecessary hurdle facing players and consumers who participate in this market. Almost none of the licensed businesses operating in this space can legally obtain a bank account or access other conventional financial services absent a change in federal law.

That is because existing federal laws and regulations mandate that this rapidly growing multi-billion-dollar industry operates almost entirely on a cash-only basis — an environment that makes businesses more susceptible to theft and more difficult to audit.

It also places the safety and welfare of these businesses’ customers at risk, as they 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.

That is why in September, members of the US House of Representatives voted overwhelmingly (321 to 103) in favor of The SAFE Banking Act — legislation that is supported by an array of non-partisan interest groups and organizations, including the Independent Bankers America and the Credit Union National Association.

At that time, Crapo expressed a willingness to call The SAFE Banking Act for a vote before the committee. But his recent comments stand in stark contrast to that pledge. 

Explicitly, he acknowledged, “I remain firmly opposed to efforts to legalize marijuana on the federal level, and I am opposed to legalization in the State of Idaho.” Sen. Crapo further suggests that banks should be disallowed to work with retailers who provide products containing THC levels above two percent and/or specific marijuana-infused edible or vapor products.

The imposition of such an arbitrary potency threshold will only perpetuate the existing problem as virtually no adult-use marijuana products or medical cannabis products dispensed in legal states fall below this limit. Further, there is no scientific basis for such a cap, as this threshold is not associated with either safety or efficacy. 

A widespread ban on edible or vapor products will similarly perpetuate the existing, untenable situation. In legal cannabis states, these products are already regulated under state law, and they are lab tested before reaching the retail market.

The imposition of a new federal prohibition will only drive these state-legal markets underground. Further, such a standard would be in direct conflict with many state laws.

Several state medical cannabis programs mandate by statute that dispensaries only provide non-herbal formulations of cannabis, such as edible-infused products and e-liquid vaping extracts. Crapo’s proposal would continue to leave providers of these products out in the cold.

Finally, his animus toward marijuana legalization is irrelevant to this policy discussion. In the majority of states, the reality is that marijuana legalization is here to stay. 

The sole question before Congress should be how to better regulate these state markets accordingly in a manner that meets the needs of the public and protects personal liberties and freedoms.

In short, no industry can operate safely, transparently, or effectively without access to banks or other financial institutions. That is why I’m asking Sen. Crapo to rethink his opposition to The SAFE Banking Act. He should also work with the majority of members of Congress who support amending federal policy so that thousands of state-compliant operators, and those millions of Americans who patronize them, are no longer subject to policies that needlessly place them in harm’s way or that impose unnecessary hurdles to doing business. 

Paul Armentano is the deputy director of the National Organization for the Reform of Marijuana Laws (NORML). He is the co-author of the book; Marijuana Is Safer: So Why Are We Driving People to Drink? And the author of the book, The Citizen’s Guide to State-By-State Marijuana Laws.