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.

MORE to learn

The pending MORE (Marijuana Opportunity Reinvestment and Expungement) Act of 2019 would decriminalize cannabis on a federal level. The bill also:

• Establishes a trust fund to support various programs and services for individuals and businesses in communities impacted by the “war on drugs.”

• Prohibits the denial of federal public benefits to a person on the basis of certain cannabis-related conduct or convictions

• Requires the U.S. Bureau of Labor Statistics to publish demographics on cannabis business owners and employees.


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.

Keys to the SAFE

The SAFE (Secure and Fair Enforcement) Banking Act of 2019 is intended to ensure access to financial services for cannabis-related legitimate businesses and reduce the amount of cash at such service providers. The bill also declares a federal banking regulator may not:

• Terminate or limit the deposit insurance or take any other adverse action against a depository institution because it has provided financial services to the business.

• Prohibit or penalize this financial institution from providing these services.

• Recommend or urge the institution to offer services to an account holder.


“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.”

Banks have remained careful at endorsing legislation carte blanche during this conflict between federal and state governments.

While recognizing the advantages of working with an industry that stands to gain $31 billion in U.S. sales, the American Bankers Association submitted a letter to the U.S. Senate Banking, Housing and Urban Affairs Committee that asks for added protections on the bill.

“ABA shares your dedication to ensuring that the bill is carefully crafted to prevent bad actors and drug cartels from laundering illegal proceeds into the financial system under the guise of state-sanctioned cannabis business,” ABA spokesman James Ballentine wrote. “Consequently, it is critical that the bill provide the Financial Crimes Enforcement Network and the federal financial regulators the authority to clearly delineate the Bank Secrecy Act obligations of financial institutions when engaging in business with state-sanctioned cannabis-related businesses.”

More cannabis at the credit union?

The California Credit Union League has received feedback from its members and proceeded cautiously as well.

Robert Wilson, the league’s vice president of state government affairs, believes that the industry will become more receptive to doing business with cannabis companies when the federal government comes on board.

“I think it’s a fair assessment that more banks and credit unions would serve the industry if the bills passed on a federal level,” Wilson said, further predicting the possibility of a “big cash grab.”

Woes of stashing the cash

Those in the cannabis industry feel the banks’ and credit unions’ pain, based on what they’re going through.

“The amount of cash back and forth between businesses is very risky and an administrative nightmare,” said Jim Hourigan, CEO of CannaCraft, a cannabis product manufacturer based in Sonoma County. The industry requires all sorts of extra hands and equipment to process transactions such as “cash counters,” safes and even security officers.

‘It’s just a matter of time’

Still, dispensary owners and managers remain optimistic.

“We’re headed in the direction of federal legalization. If it’s not 2021, it’s just a matter of time,” said Joseph Rubin, CEO of Doobie & Lighthouse. “I think there’s hope.”

The National Cannabis Industry Association agrees.

“It’s become a nonpartisan issue,” association spokesman Morgan Fox told the Business Journal.

One simply needs to point to the conservative-leaning states such as South Dakota, one in five states that just legalized cannabis in the past election.

“They didn’t even go medicinal first,” Fox said of a state’s normal course of action. “They went straight to adult recreational use.”

Fox cited the federal government’s insistence on dragging its feet despite the receptiveness from the states as a hindrance to small-business communities and job creation.

“It’s not a poison pill. At the very least, don’t stand in the way of progress if you can’t endorse it,” Fox said, addressing the feds. “If the (federal) bills pass, it doesn’t mean a lot of larger banks will jump into the cannabis services sector, but maybe some mid-sized banks.”

“The hesitancy is really because cannabis is a Schedule 1 drug right now,” said Jeremy Empol, the league’s vice president of federal government affairs.

Will a new executive branch of the federal government matter?

“Time will tell, Empol said.

‘This train has left the station’

In the meantime, California patiently awaits the nation to catch onto what it’s known from as far back as 1996, when the state legalized the substance for medicinal purposes.

“California is well poised to be the leading cannabis growth state in the nation,” state Sen. Mike McGuire, D-Healdsburg, told the Business Journal.

The lawmaker cited the growth in the Emerald Triangle of Humboldt, Mendocino and Lake counties located in his district as evidence of commercial potential.

“North Coast banks will benefit significantly. Let’s be honest, cannabis will be a boon for North Bay banks and credit unions,” he said. “It all comes down to the federal government. The bottom line is the federal government must act. It’s absolutely ridiculous that cannabis is classified as the same scheduled drug as cocaine and meth. This train has left the station, leaving the federal government behind.”

Susan Wood covers law, cannabis, production, as well as banking and finance. For 25 years, Susan has worked for a variety of publications including the North County Times in San Diego County, Tahoe Daily Tribune and Lake Tahoe News. She graduated from Fullerton College. Reach her at 530-545-8662 or

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