Northern California cannabis industry banking on legalization bills stalled in Congress
In an industry driven by greenbacks, cannabis business stakeholders and supporters are banking on two pending federal bills and one new state law that would allow them access to traditional financial accounts without having to look over their shoulders.
Because even with 33 states now making cannabis legal, the federal government does not, leaving many banks heavily regulated by the U.S. government, on the sidelines. This is despite companies at least in the Golden State paying taxes to both the state and the federal governments, while also staying open as an essential business during the COVID-19 crisis. Many in the industry call the double standard a hypocrisy.
Banks and credit unions are seeking protections from repercussions from the federal government because they’re bound by the Controlled Substances Act that makes it illegal to handle cannabis deposits.
Some banks and credit unions are willing to do so.
Community First Credit Union in Santa Rosa chose to go out on a limb last year and dedicate the extra time and staff to manage a few dozen accounts for cannabis businesses. No accounts involve lending.
“It requires us to do a ton of work, and it’s expensive,” CEO Todd Sheffield told the Business Journal. “It’s an important service though.”
Case in point, one employee manages 24 cannabis businesses in contrast to that one staffer handling 400 other commercial accounts.
The credit union has to turn in point-of-sale reports, obtain a list of vendors, ensure each grower is operating legally and check each transaction for banking regulators.
“I like to refer to it as we’re deputized by law enforcement. If we do something wrong, we’re subject to penalties that can be drastic against an institution and an individual,” he said. “If you’re in the cannabis business, you’re proven guilty until proven innocent.”
California cannabis businesses and their financial institutions got a boost when Gov. Gavin Newsom signed Assembly Bill 1525 into law last September that essentially decriminalized cannabis banking on a state level.
Still, many banks have balked at opening accounts for them.
The game changers in the industry’s struggle against the feds lie in the U.S. Congress.
Its best hope is outlined in one piece of legislation that decriminalizes the substance that comes in many forms now as a Schedule 1 drug along with cocaine and methamphetamine under federal rules.
MORE SAFE legislation
The MORE (Marijuana Opportunity Reinvestment and Expungement) Act of 2019 was introduced in July 2019 by Sen. Kamala Harris, D-California, who is now the projected U.S. vice president-elect. The bill that passed a House Judiciary Committee by a 24-10 margin remains in the U.S. Senate Finance Committee, where a vote may come as early as December.
From the House side, another standout bill — SAFE (Secure and Fair Enforcement) Banking Act of 2019, which also sits stalled in the U.S. Senate, would provide the protections for financial institutions seeking to do business with cannabis businesses without fear of retribution. It was introduced by Rep. Ed Perlmutter, D-Denver, in March 2019.
Perlmutter’s colleague in the House, Rep. Mike Thompson, D-St. Helena, weighed in on the two bills with strong support.
“Cannabis is legal in California, and local small businesses that legally sell and distribute it should have access to the banking they need to succeed. That’s why I support the Secure and Fair Enforcement (SAFE) Banking Act, a bipartisan bill that would allow legitimate marijuana and hemp-related businesses to access banking services,” Thompson told the Business Journal. “I will also vote to pass the MORE Act, when it comes up for a vote in December. Our local businesses need to have access to financial institutions that will help them grow.”