Several state attorneys general are asking Congress to pass legislation that would let cannabis businesses use the banking system
David Royse | LedeTree
Banks typically won’t provide financial services to marijuana-related businesses, even in states where selling cannabis is legal, because of a federal law that still considers marijuana illegal.
The letter, signed by 18 AGs, and sent to congressional leaders, requests legislation to provide a legal “safe harbor” for banks that want to offer products and services to cannabis businesses in states where it is legal and regulated.
The AGs note that the legal use of marijuana is widespread, with 29 states allowing it for medical purposes and eight states plus D.C. allowing non-medical use. But, even in those state, “banks providing services to state-licensed cannabis businesses could find themselves subject to criminal and civil liability under the Controlled Substances Act and certain federal banking statutes,” the letter says.
It also notes analysts’ projections that the industry’s proceeds could exceed $20 billion in 2021.
“Yet those revenues often exist outside of the regulated banking space,” the letter says. “Businesses are forced to operate on a cash basis. The grey market makes it more difficult to track revenues for taxation purposes, contributes to a public safety threat as cash intensive businesses are often targets for criminal activity, and prevents proper tracking of large swaths of finances across the nation.
Currently, there is legislation pending in Congress known as the SAFE Banking Act, that would accomplish much of what the AGs are suggesting. The measure was introduced last spring, but the measure hasn’t gained any traction.
“The requested legislation would not only protect public safety by bringing gray-market financial activities into the banking sector and thus subject to law enforcement monitoring, but would also result in billions of dollars infused into the banking industry,” Maryland Attorney General Brian Frosh said in press release announcing the move.
When introducing the proposed bill in Congress last year, sponsor Sen. Jeff Merkley of Oregon offered another reason it would be good to have banking services available to cannabis businesses:
“Forcing legal businesses to operate in all cash is an invitation to money laundering and robbery,” said Merkley. “It’s absurd that cannabis business owners in Oregon have to shuttle around gym bags full of cash to pay their taxes or compensate their employees. This is a public safety issue.”
Many banks want to be able to provide banking services to what is seen as one of the fastest growing industries in the country.