Two pieces of legislation introduced in Washington during this session have the potential to allow banks to offer their financial services to medical and recreational marijuana businesses in 23 states and the District of Columbia.
Despite movements to legalize marijuana throughout half the country, the plant’s classification as a Schedule I controlled substance continues to make it difficult for pot shops that wish to do business more professionally (accepting credit cards, making deposits and writing checks for taxes or to pay employees).
“No industry — be it the production and sale of marijuana or the production and sale of widgets — can operate safely, transparently or effectively without access to banks or other financial institutions,” said Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws.
The lack of access to financial services can create dilemmas for both the businesses and the government. While cash can put the owners and employees of medical and recreational marijuana dispensaries in a place of higher risk, it can also make it more difficult for authorities to track earnings and tax revenue.
That’s the basic reasoning U.S. Rep. Ed Perlmutter, D-Colorado, cited when he introduced the Marijuana Business Access to Banking Act (HB2076) to the House on April 28.
“We need to address the public safety, crime and lost tax revenue associated when these legal and regulated businesses are operating in a cash-only system,” he said in a news release. “We also need to provide financial institutions assurance that they can make their own business decisions related to legal, financial transactions without fear of regulatory penalties or criminal prosecution.”
HB2076 would essentially create a “safe harbor” for banks and credit unions when it comes to dealing with cash from state-licensed dispensaries. It is currently sponsored by Perlmutter and 16 other Republicans and Democrats from states that have legalized marijuana for medical and/or recreational use.
Some banks have already cautiously entered the market, including MBank, a financial services provider based in Oregon. The bank received approval from the Federal Deposit Insurance Corporation and a master account with the Federal Reserve System in order to operate. It announced plans in January to offer its services across state lines, in Colorado.
“While it is encouraging to see that a small but growing number of financial operators are beginning to provide necessary services to those engaged in state-compliant cannabis commerce, it is self-evident that this industry will remain severely hampered without better access to credit and financing,” Armentano said.
A week after the company announced it was moving into the Colorado market, MBank pulled out based on what it referred to as a lack of infrastructure (although many have speculated the move was spurred by the potential federal risks of operating across state lines).
Another bank, Fourth Corner Credit Union based in downtown Denver, plans to open its doors this year, but has yet to go public as it awaits news from the country’s legislature. Colorado granted the business a charter in November to become the industry’s only dedicated financial institution.
The U.S. Treasury and Justice departments said in January that they would allow banks to open accounts for state-licensed marijuana vendors under certain stipulations, but financial institutions remain wary of the risks involved.
“Ultimately, the responsibility is upon Congress — not upon the U.S. Treasury Department or upon state lawmakers — to change federal policy so that this growing number of state-compliant businesses, and their consumers, may operate in a manner that is similar to other legal commercial entities,” Armentano said.
The opening of Fourth Corner awaits action from the National Credit Union Administration and the processing of the credit union application for a master account with the Federal Reserve. Fourth Corner can operate until the NCUA makes a decision on the latter. Although the Federal Reserve’s decision is expected this year, the company stated on its website that receiving NCUA insurance coverage could take up to two years. Such institutions are allowed to operate without NCUA coverage, but with increased risk.
According to federal bill trackers, including GovTrack.us, HB2076 has less than a 1 percent chance of surviving. But there is another, broader bill that would essentially allow banks and businesses the same freedoms.
The Compassionate Access, Research Expansion, and Respect States Act (SB683) introduced in March, and the CARERS Act of 2015 (HB1538), introduced in April, include language specific to amending the banking regulations that currently apply to such institutions when it comes to marijuana money. The CARERS Act has garnered bipartisan support, finished its second reading and has been referred to the Judiciary Committee.
If signed into law, the bill would:
• allow states to legalize medical marijuana without federal interference;
• allow interstate commerce of cannabidiol (medicinal non-intoxicating) oils;
• reclassify marijuana as a Schedule II controlled substance;
• allow banks to provide financial services to dispensaries;
• allow Veterans Administration physicians to prescribe medical marijuana; and
• eliminate barriers when it comes to medical marijuana research.
Armentano said that if legislators feel HB2076 is dying, they might consider appending it to the CARERS Act rather than risk it failing as standalone legislation.
The Marijuana Business Access to Banking Act was originally submitted to Congress in 2013 and was reintroduced April 28. The bill is currently in committee and the exact language of it has not yet been published, creating a hesitance from many public figures to comment upon it.
“I am familiar with the fact that this act was referred to Congress last week. But the actual verbiage of the act is not yet available at Congress.gov, so I am not familiar enough with the specifics to really comment on it,” said Robin Roberts, president of the Colorado Springs-based Pikes Peak National Bank.