Imagine running a business with hundreds of employees and having to make all payments, including payroll in cash.
That’s the reality for John Lord, the owner and CEO of Colorado-based marijuana cultivator and retailer LivWell Enlightened Health.
Lord testified before the Senate Banking Committee in July, where the conversation centered on the Secure And Fair Enforcement (SAFE) Banking Act of 2019. The proposed bill, if passed, will give banks and financial institutions a “safe harbor” from federal regulations prohibiting them from working with cannabis-related businesses, Fortune reported.
“At one point, I rented out a former bank to use as a vault to store cash,” Lord testified. “Another time, I had no choice but to walk into the IRS in Denver with more than $3 million in cash in order to pay federal taxes.”
The 116th Congress is the most cannabis-friendly in history, yet banks are scared to deal with the industry and cannabis companies across the country are forced to operate as cash businesses.
Thirty-three states and the District of Columbia have passed laws legalizing marijuana for recreational use, medicinal use or both. Most recently, Illinois became the second-most-populous state to legalize recreational marijuana.
But there’s a growing gap between federal and state cannabis laws.
The federal prohibition on cannabis means that marijuana growers and retailers often cannot access even the most basic banking services. Even businesses that provide them with products and services can be subject to sanctions.
Banks tend to take their cues from the federal government. Not only does selling marijuana violate federal law but handling the proceeds is considered money laundering, New York Times reported. Very few banks are willing to take the risk.
In legal marijuana markets, that means “cash is not simply king; it is all-consuming. It is counted and recounted and stuffed into bulging envelopes, slid into back pockets and ferried around town in beaters and fully loaded SUVs,” Robb Mandelbaum wrote for NYT.
There have already been seven hearings on cannabis this session, Forbes reported. A marijuana banking bill passed a key committee and the full House adopted an amendment to block federal interference in state legalization laws.
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“Bills to address policy failures in cannabis banking, veterans access, decriminalization and restorative justice have started moving through the legislative process,” said Rep. Earl Blumenauer (D-OR), who has worked for decades to end marijuana prohibition.
The status quo is “a federal chaos” that enables money laundering, robbery, and tax evasion, said Sen. Jeff Merkley (D-Ore.), who testified at the hearing. Even people with indirect links to cannabis businesses such as the spouses of people who work in the industry are vulnerable to losing bank accounts and other financial services, Merkley said.
“Forcing legal businesses to operate in all cash is dangerous for our communities.”
Sen. Jeff Merkley (D-Ore.)
Merkley and Cory Gardner (R-Colo.) are co-sponsoring the Senate version of the bill.
Sixty-one individual cannabis-focused bills were filed in the first seven months of the 116th Congress. That doesn’t count the broader large-scale bills.
Without a federal law providing explicit legal clearance to banks, ancillary businesses ranging from accountants and lawyers to plumbers and electricians remain at risk of sanctions for working with cannabis businesses, said Rachel Pross, who testified on behalf of the Credit Union National Association (CUNA).
In Denver, Cannabis companies accounted for 10 percent of reported burglaries from 2012 to 2016, but represented less than 1 percent of all local businesses, according to Joanne Sherwood, president and CEO of Colorado-based Citywide Banks.
It’s uncertain whether broad reforms such as the STATES Act or other marijuana legislation will be allowed to advance under Majority Leader Mitch McConnell (R-KY), Forbes reported:
While bill introductions, hearings and report language are undoubtedly positive steps forward—especially in a quantity never before seen on Capitol Hill—they in and of themselves don’t change any laws, get anyone out of jail or repair the harms of the drug war.
Forbes
