States Ask Congress to Allow Cannabis Access to Banks
Legal marijuana is a multi-billion industry, with nearly every transaction done in cash.
In the wake of Attorney General Jeff Sessions’ decision to rescind a policy that has kept the federal government from interfering in states where marijuana is legal, state leaders have turned to Congress for help.
The focus is on banking, one of the major hurdles for legal marijuana businesses.
In a letter sent this month to Congress, Attorneys General from 18 states that have either legal recreational or medical marijuana -- or both -- asked members of Congress to change the law and create an exemption for banks that want to deal with marijuana businesses.
It appears to be a move to create stability in a rapidly growing sector of the economy. Sessions’ actions this month have creating uncertainty in an industry that already has become a $7 billion market.
The Banking Issue
Marijuana is challenging unlike any other industry because, despite the fact more than half the states have made marijuana legal to some degree, it remains flatly illegal under federal law. Marijuana is legal for adult recreational use in Alaska, California, Colorado, Massachusetts (starting in April), Nevada, Oregon, Washington and the District of Columbia.
Big banks won’t extend services to marijuana businesses out of fear of running afoul of federal regulators. Sessions’ decision to rescind the Cole Memo, an Obama era policy that forbade federal prosecutors from going after marijuana businesses operating legally under state law, has injected more instability into the situation.
Enter the state attorneys general, and their letter.
What They Want
The Attorneys General begin by arguing that it serves no one to have marijuana businesses operating in a “grey market” where they are forced to use cash for most transactions without access to banking services.
They directly ask for legislation that would provide “safe harbor” to banks that work with legal marijuana businesses in states where cannabis production and sales are legal. That would inject billions of dollars into the banking industry, they argue, plus allow law enforcement to better monitor marijuana business transactions.
This also could result in higher tax revenue, as it would be easier to track marijuana business income and ensure it is taxed properly.
What’s not said directly is what many felt when Sessions rescinded the Cole Memo -- it already seems a bit late in the day to try to stifle the marijuana industry’s rapid growth. The letter points out that the legal marijuana industry made $6.7 billion in 2016 and is projected to reach $20 billion by 2021.
Banking reform for marijuana businesses is not a new issue. California leaders have considered creating a state-run bank to serve the cannabis industry. At the federal level, both Sen. Elizabeth Warren, D-Mass, and Sen. Bernie Sanders, I-Vermont, asked for banking regulation changes last January.