The Senate Banking Committee held a hearing on July 23, 2019, on the lack of financial services available to the cannabis industry and the challenges this creates. The hearing shifted the conversation around cannabis at the federal level to one of support and concern. The Chairman of the Senate Banking Committee, Senator Crapo who is a Republican from Idaho, opened the hearing with a statement that voiced his concern that federal regulators are choking off the ability for lawful businesses, such as the cannabis industry, to obtain banking services.
Senator Cory Gardner from Colorado and Senator Jeff Merkley from Oregon spoke about the safety issues that exist in their states that are caused by the lack of banking services. Senator Gardner stated that the situation is untenable as hundreds of millions of dollars in cash are being driven in cars through the state.
The Senators also focused on the individual hardships faced by industry employees including the loss of bank accounts, credit cards the inability of cannabis employees to obtain a mortgage. The hearing also highlighted the impact on ancillary service providers such as plumbers, electricians, and union members.
Both Senators demanded that the federal government respect the state’s rights to develop a lawful cannabis industry. Senator Cory Gardner thoughtfully stated that the federal government must recognize the majority of citizens support cannabis and it is the one issue that the country can unite around. Senator Gardner remarked that we are a government of the people and the people have changed their point of view with regards to this issue.
The tone of the hearing along with sentiment expressed in Senator Crapo’s statement reveal that Congress is finally listening. The tables may be turning in a positive manner for the cannabis industry.
So what is the SAFE Banking Act and how will it help the cannabis industry?
Under the Act, banks can provide financial services to the cannabis industry, and federal regulators may not initiate an action against the bank because cannabis is classified as a Schedule 1 drug. The banking regulator, FinCen, must also revise guidance to the banks within 6 months of the law’s effective date as to the type of activity a bank should report to it as suspicious or indicative of money laundering.
The SAFE Banking Act is a great start to bringing the cannabis industry into the mainstream commercial market. The devil will be in the details as to how federal regulators will treat the legacy money that will be brought into the banking system. Cannabis businesses should ensure to have appropriate documentation as to the origin of all investments and revenues. All new investments should be vetted to ensure that an audit trail exists to demonstrate that the money is derived from legal sources.
The Senate Banking Hearing was remarkable in that both sides of the aisle appear to be uniting around cannabis. Republicans will have a hard time arguing that state rights don’t matter. Democrats will be able to provide their constituents with a win that has been in the wings for a long time. A remarkable outcome in a contentious political environment.