In a major setback for state-legal cannabis businesses and the financial institutions interested in working with them, the powerful House Appropriations Committee rejected an amendment Wednesday that would have shielded banks who do business with the cannabis industry from federal sanctions.
The Safe Banking Amendment, sponsored by Ohio Congressman Dave Joyce (R), was intensely debated by lawmakers before being defeated by a viva voce vote. Rep. Joyce tried to immediately introduce a modified amendment but ultimately withdrew the measure.
What Would The Safe Banking Amendment Do For America’s Legal Cannabis Industry?
Across a majority of U.S. states, legal, licensed and regulated cannabis businesses serve hundreds of thousands of patients and customers. They pay their taxes and follow their states’ cannabis laws. Many of them have even secured approval from the municipalities in which they operate. They employ community members, connect caregivers and people suffering from illness and continue to innovate new products and services. And they do it all with cash.
The federal prohibition on marijuana has had the serious consequence of denying these businesses access to the banking services all other industries take for granted.
Companies cannot accept credit cards as payment for cannabis products. They can’t deposit their massive revenues in a bank account. They can’t write payday checks and have to pay taxes in cash. It’s even difficult to find an institution that would offer a loan to a small cannabis business.
In other words, any service or product banks provide that a business could take advantage of, cannabis businesses can’t get. And that’s because federal banking regulations prohibit federally insured banks from doing business with illegal enterprises. In the eyes of the federal government, state-legal cannabis businesses are illegal.
Ohio Republican Representative Dave Joyce’s Safe Banking Amendment wouldn’t have ended the federal ban on marijuana. But it would have blocked the federal government’s ability to threaten sanctions against financial institutions that do business with the cannabis sector.
In short, the measure would have made it impossible for the U.S. Department of Treasury to punish banks for any involvement in the legal cannabis industry.
Rep. Joyce presented the measure as a spending restriction that would block the government’s use of funds to penalize banks. The restriction would have stood for just one year if it had passed.
Why Did The House Appropriations Committee Reject The Banking Amendment?
The cannabis advocacy group NORML claims that “no industry can operate safely, transparently, or effectively without access to banks or other financial institutions.”
Echoing NORML, Rep. Joyce argued that his Safe Banking Amendment was “about public safety and financial transparency.” But Joyce was just one of at least 19 lawmakers who spoke during an intense and protracted debate over the measure.
After the measure was voted down viva voce, Rep. Joyce and supporters worked quickly to introduce a modified amendment. They attempted to limit the spending restriction to just medical cannabis businesses in order to secure broader support.
But the absence of key GOP supporters and hang-wringing by other members of the Appropriations Committee prompted Chairman Rodney Frelinghuysen (R-NJ) to pressure Joyce to withdraw the second proposal.
Joyce pressed ahead twice. He wanted to hear the committee’s thoughts about the limited version. But Joyce ultimately opted to pull the measure, rather than force it to a vote.
A Treasury Department memo is likely the reason why the Appropriations Committee refused to add Rep. Joyce’s rider to a spending bill.
Banks that work with cannabis businesses must file reports that they do so. Under Obama, this rule was part of federal guidance to banks on working with the cannabis sector without violating regulations. But Attorney General Jeff Sessions‘ rescission of other Obama-era policies on cannabis enforcement has changed the tone of the rule.
While the reporting rule remains in place, the Justice Department “will continue to work closely with law enforcement and the financial sector to combat illicit finance,” said the updated memo.
Banks Are Working With Cannabis Businesses Despite Federal Prohibition
Risks of being charged with money laundering notwithstanding, more banks are doing business with the legal cannabis industry than ever. Federal data shows that by the end of March 2018, 411 banks and credit unions were actively working with marijuana businesses. That number represents a 20 percent increase from the time President Trump took office last year.
Support for allowing marijuana businesses to access financial services is gaining strength in Congress. Treasury Secretary Steve Mnuchin has also expressed interest in solving the cannabis industry’s cash problem.