Feds, states may find common ground on cannabis industry banking, experts say

Two federal bills could change how legal California cannabis businesses operate and in particular access the banking system, an ongoing challenge since their businesses remain illegal at the federal level, leaving many banks unwilling to have them as clients.

One Senate bill, the STATES (Strengthening the Tenth Amendment Through Entrusting States) Act, is sponsored by Senators Cory Gardner, R-Colorado, and Elizabeth Warren, D-Massachusetts. It would allow states to determine the best approach to cannabis regulations within their borders without federal interference. It would also take cannabis off the federal controlled substance list.

The other, the Secure And Fair Enforcement Banking (SAFE) Act, is in the U.S. House of Representatives. It would open banking services to cannabis businesses in states where it is legal. It aims to 'increase public safety by expanding financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such businesses.'

Most states appear to support the measure and California Attorney General Xavier Becerra, along with a 38 other attorneys general, urged Congress last week to pass the SAFE Banking Act to give licensed cannabis businesses access to the federal banking system.

Perhaps signaling a willingness to bend on the cannabis issue, U.S. Attorney General William Barr said last month that while he still supports a uniform federal law against marijuana, if no consensus could be reached allowing states to make their own decisions was an option.

Although federal law currently outlaws marijuana under the 1970 Controlled Substances Act, state laws are currently a patchwork, outlawing or decriminalizing it or allowing its medical or recreational use, with 10 states and the District of Colombia having legalized it.

Adding to the legislation aiming to alter the legal landscape is the Marijuana Justice Act. The bill, sponsored by Sen. Cory Booker, D-New Jersey, seeks to create a federal framework for cannabis businesses to legally operate while addressing the social justice issues around marijuana prohibition, including expunging the records of some people convicted of marijuana-related felonies.

The SAFE and STATES acts have pricked up the ears of not only the legal cannabis industry in California and elsewhere but also the banking industry.

Aaron Stetter, executive vice president of policy and political operations at the Washington D.C.-based Independent Community Bankers of America, said, 'We're more comfortable with the SAFE act.'

Stetter said the group does not have a position on the STATES act.

Stetter noted it would limit the ability of federal banking regulators 'to force a bank to terminate a relationship with a cannabis related business or withhold deposit insurance,' and would allow banks to determine whom they did business with based on their own business needs and those of the communities they served.

He added that equally important is a provision in the bill protecting banks working with business that serve the cannabis industry but are not directly involved in the business themselves.

'We want to support the best legislation we possibly can that puts the decision making back with the banker,' Stetter said.

The bill still faces an uphill battle before arriving on the president's desk. No major banks have come out in support of it and while a favorable vote is expected in the House this summer, it could still face opposition in the Republican-controlled U.S. Senate.

Even if the SAFE banking act does become law, big banks like Wells Fargo probably would not mingle cross state cannabis cash, according to Neal Levine, CEO of advocacy group Cannabis Trade Federation.

Levine said he supported the passage of the STATES Act into law during North Bay Business Journal's North Coast Cannabis Industry Conference last week, noting 'the conflict between federal and state law absolutely needs to end.'

'The state regulations are so varied and so tough because there's no federal regulation,' Levine said. 'The STATES Act is not the end of prohibition, it's not legalization at the federal level, but it's about 60% of the loaf.'

It would shift the conversation around cannabis on Capitol Hill 'from should we do this … to how should we do this,' he said.

While the act will not 'fix' the lack of access to banking many cannabis businesses face, it 'removes the threat of the Department Of Justice coming in and kicking in our doors and taking our assets for the crime of running a state legal business,' Levine said.

The STATES Act would not solve the banking issue completely, but 'lack of access to banking is a huge public safety issue,' and the bill would make banks more willing to handle cannabis business proceeds, much of which are currently in cash, he said.

Staff Writer Chase DiFeliciantonio covers technology, banking, law, accounting, and the cannabis industry. Reach him at or 707-521-4257.

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