Aaron Smith, CEO of the National Cannabis Industry Association, speaks during a news conference on the Safe Banking Act outside the US Capitol in Washington, Sept. 14, 2022.
Ting Shen | Bloomberg | GettyImages
The Senate banking committee is holding its first-ever hearing Thursday on a bipartisan bill that would allow the cannabis industry to access traditional banking services, which marijuana businesses see as critical to their survival.
The meeting, titled Examining Cannabis Banking Challenges of Small Businesses and Workers, will hear testimony from lawmakers on both sides of the aisle, including Sens. Jeff Merkley, D-Ore., and Steve Daines, R-Mont., who reintroduced the stand-alone bill last week. The committee will also hear from witnesses including the Cannabis Regulators of the Color Coalition, Drug Policy Alliance and the United Food and Commercial Workers International Union.
Thursday’s hearing will determine next steps in getting the bill to the Senate floor for a vote, as Senate Majority Leader Chuck Schumer and other key lawmakers express support for it. It comes as the marijuana industry, which is facing a downturn even as more states approve legal markets, has pushed Congress to take action on the issue.
“Without full access to the banking and payments system, legal cannabis businesses are forced to operate in the shadows,” said Sen. Sherrod Brown, D-Ohio, who is also chair of the committee.
Many business owners also rely on funds from friends and family in lieu of small business and bank loans because “they might go through all the cost and effort, only to be denied,” Brown said.
Echoing Brown, committee ranking member Sen. Tim Scott, RS.C., said “Congress has a responsibility to ensure all legal industries have access to financial institutions and services.”
But he added lawmakers must eliminate the possibility of loopholes in money laundering laws before the act becomes law. Any loophole could make it harder for law enforcement to catch drug and weapons traffickers, Scott said.
Senate action on the bill is welcome news to executives across the industry, including Craig Sweat, owner of Uncle Budd NYC, the company that first brought mobile dispensary trucks to New York City.
“I’ve been held up for so long that I have product that is sitting and getting old,” said Sweat, who after years of operating his mobile dispensary company and then a delivery service, has entered into a lucrative manufacturing and licensing partnership with Omnium Canna to produce his products.
“I have no way of transferring funds, I can’t pay staff, I’m just sitting on my hands,” Sweat said, adding his latest business venture hasn’t been able to launch as banks, fearful of federal prosecution, have been giving him the ‘runaround.'”
The Secure and Fair Enforcement Banking Act, also known as SAFE, hit a wall in Congress last year after lawmakers excluded it from a $1.7 trillion government funding bill. It was the seventh time the legislation, which has always had strong bipartisan support, failed to get through the Senate after passing in the House of Representatives.
Last month, the bill, which has been tweaked since last session, was reintroduced by Sens. Merkley and Daines, and reps. Dave Joyce, R-Ohio, and Earl Blumenauer, D-Ore. The bill has strong bipartisan support with 38 additional co-sponsors in the Senate and eight more co-sponsors in the House.
Under federal law, banks and credit unions face federal prosecution and penalties if they provide services to legal cannabis businesses since it is still a Schedule I substance, along with heroin and LSD. Schedule I substances, according to the federal Drug Enforcement Administration, are defined as drugs with no currently accepted medical use and a high potential for abuse.
Without access to traditional banks, legal marijuana businesses can’t access loans and capital, or even use basic bank accounts. As such, businesses are forced to operate in a cash-only model, which can result in robbery, money laundering and organized crime.
Cat Packer, chair of the Cannabis Regulators of Color Coalition, told senators small cannabis businesses and workers are forced to operate in a “gray market” dealing in cash-only transactions. The term “black market” has negative connotations for black and brown business operators disproportionately affected by funding access.
“We don’t want to equate black with illegal,” Packer, who is Black, said. A black man behind her nodded enthusiastically.
“I want to just emphasize this: the only way to eliminate the criminality of small businesses and workers is to completely remove cannabis from the Controlled Substances Schedule,” Packer added.
Key components of the bill protect banks that work with state-legal cannabis businesses. The legislation would shield them from being penalized by federal regulators, creating a safe harbor from criminal prosecution, liability and asset forfeiture for banks, their officers or employees.
The latest version of the plan also extends safe harbor to organizations that assist underserved communities, including the Community Development Financial Institutions and Minority Depository Institutions, smaller institutions tailoring to communities that often have lacked access to banking services.
This week, the American Bankers Association, which represents banks of all sizes from every state in the country, sent a letter thanking the committee for taking up the matter and urging senators to “markup and advance the legislation as soon as possible.”
In a joint statement released after the hearing, Schumer and Sens. Cory Booker, DN.J., and Ron Wyden, D-Ore., said they were “encouraged” to see the bill reintroduced after key improvements to the legislation. The lawmakers co-authored the Cannabis Administration and Opportunity Act together, which would remove marijuana from the federal list of controlled substances.
“We look forward to watching this legislation progress through the banking committee and working with bipartisan partners to include additional improvements, such as the Harnessing by Pursuing Expungement (HOPE) Act, which would support states that want to expunge cannabis record with grants,” they said. said.