WASHINGTON — Congress responded to the growing number of states legalizing marijuana by passing a bill Wednesday that would let banks and credit unions serve cannabis-related businesses without running afoul of federal laws.
The Secure and Fair Enforcement — or SAFE — Banking Act would remove a potential obstacle to Utah fully implementing its state-regulated system of growing, processing and dispensing medical marijuana products by March of next year.
Utah Gov. Gary Herbert “is grateful to the House of Representatives for recognizing the issue at hand and taking action to spare businesses selling cannabis the inconvenience and risk of operating on a cash-only basis,” his spokeswoman Anna Lehnardt said following the vote.
Three of Utah’s four House members voted for the measure that received broad bipartisan support in passing 321-103. Rep. Chris Stewart, R-Utah, was the only Utah congressman to vote against the bill.
The bill’s prospects in the Senate remain uncertain.
Providing banking services to marijuana growers and dispensaries has been a problem since the drug first became legal in California in 1996. Because cannabis is a Schedule I narcotic under federal law, financial institutions that served marijuana related businesses risked being in the crosshairs of federal regulators and prosecutors for laundering money of a criminal enterprise, even if the business was legal under state law.
The legal conflict made it impossible for marijuana-related businesses to have deposit and checking accounts, forcing them to deal in cash, which made them easy targets for violent crime and a headache for local treasuries processing thousands of dollars in cash tax payments.
Horror stories of robberies, assaults, murder and business owners lugging duffle bags of cash around town to pay their bills were recounted at a House hearing on the SAFE Banking Act in February, the bill’s first hearing since Rep. Ed Perlmutter, D-Colo., introduced the bill six years ago.
The bill was framed as a public safety issue during Wednesday’s debate.
“If someone wants to oppose the legalization of marijuana, that’s fine. But American voters have spoken and continue to speak, and the fact is you can’t put the genie back in the bottle. Prohibition is over,” Perlmutter said. “Our bill is focused solely on taking cash off the streets and making our communities safe and only Congress can take these steps to provide this certainty for businesses, employees and financial institutions across the country.”
A federal fix
The pressure to act has been building as 47 states have legalized cannabis in some form. Legal medical and recreational sales are projected to exceed $10 billion this year, according to Marijuana Business Daily.
The marijuana banking dilemma became an issue in Utah last year after voters legalized medical cannabis and state lawmakers created a regulatory framework where growing, processing and dispensing involves state agencies and private contractors that have long-established bank accounts.
Earlier this month, Utah lawmakers tweaked the law to allow for a limited number of private pharmacies to sell medical marijuana, allowing local health departments not to be involved in dispensing the products and exposing themselves to possible, but unlikely, federal prosecution.
Obama-era federal guidelines have shielded financial institutions from prosecution and penalties for serving marijuana-related businesses. But supporters of the SAFE Banking Act say those directives are temporary and compliance is costly for the small number of financial institutions that have tried to service the growing marijuana industry.
With a majority of states legalizing cannabis in some form and Democrats taking control of the House in January, a broad, bipartisan coalition of state government leaders, banking industry officials and marijuana advocates turned up the pressure on Congress to fix the banking dilemma.
Utah government leaders joined their counterparts in other states by signing on to letters urging the passage of a banking bill. Among them was Republican Utah Treasurer David Damschen, who is effectively the state’s banker that collects tax receipts and negotiates banking arrangements for all state agencies.
He said he appreciated the House advancing the SAFE Banking Act and urged the Senate to do the same.
“The federal government needs to respect the move among states toward varying degrees of legalization and put the power back into the hands of the people,” he said following Tuesday’s vote. “This is not a partisan issue; it is one of public safety, humanitarianism and states’ rights.”
Uncertainty in Senate
Rep. John Curtis, R-Utah, echoed the states’ rights argument in a statement issued after his vote to support the bill. “Utah has spoken and the state’s medicinal cannabis program is greatly complicated without a safe harbor for institutions that provide financial services to cannabis-related businesses,” he said.
Rep. Ben McAdams, D-Utah, who sits on the House Financial Services Committee and voted for the bill, stressed that the bill doesn’t legalize marijuana on the federal level, but does give “safe harbor” for the state approved businesses in Utah’s medical marijuana system. And the protections extend to accountants, lawyers, electricians and other professionals who might do business with legal cannabis businesses.
Utah Bankers Association President Howard Headlee said the House vote is a big step in reconciling state and federal law so financial institutions can operate without fear of federal penalties.
“We want to support state marijuana policy and we can’t do that without changes in federal law,” he said.
But opponents in the House said the bill falls short of addressing the bigger issue of removing cannabis from the federal schedule of illegal drugs. And until that happens the risks remain of ongoing conflicts in other areas outside of banking.
Stewart’s no vote was consistent with his opposition to giving sellers of medical marijuana any kind of break to make their business easier to operate, even if it conflicts with his home state’s need to accommodate medical marijuana sales.
“I voted no on the SAFE Banking Act because I don’t want to legitimize the recreational use of marijuana,” he said. “Selling dope isn’t the same thing as selling donuts and banks shouldn’t treat them the same.”
While all but one Democrat voted against it, many before Wednesday’s vote also called for a more far reaching bill that would not only decriminalize cannabis and but address damage done to minority communities during the federal “war on drugs.” They said a disproportionate number of minorities have criminal records for using cannabis that have set them back in their lives.
Similar sentiments have been expressed by several Democratic presidential candidates and Senate Minority Leader Chuck Schumer, D-N.Y., according to the website Marijuana Moment.
“We need decriminalization at the federal level, criminal justice reform, and investment in opportunity for minority & women-owned small businesses,” Schumer tweeted last week.
Supporters of the bill urged House Judiciary Chairman Jerry Nadler, D-N.Y., to get legislation in his committee that addresses those issues to the House floor for a vote.
Whether that will smooth the way for passage in the Republican-controlled Senate is uncertain. Senate Banking Committee Chairman Mike Crapo, R-Idaho, has said his committee will vote on the issue before the end of the year. The senate bill has 33 cosponsors, including four Republicans.
Neither of Utah’s senators are among them.
“Sen. Romney supports reclassifying marijuana as a Schedule II controlled substance so that there can be further evaluation of its use,” said the senator’s spokeswoman Arielle Mueller.
Headlee said he met with Romney on Wednesday and would meet with Sen. Mike Lee on Thursday.
“I’m optimistic the Senate will figure out a way to reconcile state and federal law and figure a way out of this conflict,” Headlee said.