PayPal, Inc. has its eye on pot payments. The payments processor recently joined the growing number of companies, municipalities and others lobbying Congress to approve cannabis banking legislation.
The San Jose, Calif.-based financial technology and small business lending company— which more typically lobbies on issues like mobile banking, transaction fees and international trade—added pot banking in its first quarter 2019 lobbying report.
PayPal’s foray into lobbying on the SAFE Banking Act is a signal that mainstream financial services companies are eager to to start doing business with the cannabis industry—and are willing to pony up to get the legislation through Congress.
The SAFE Banking Act would protect banks and credit unions that provide services to the cannabis industry from enforcement actions by federal regulators. Though legal in many states, marijuana remains illegal at the federal level and pot-related financial transactions require extensive reporting and other requirements under the Bank Secrecy Act and anti-money laundering statutes.
The legislation (H.R. 1595, S. 1200) would also make sure that new banks that want to work with the industry aren’t denied charters, deposit insurance or other tools necessary to conduct the business of banking.
More than 20 groups are lobbying on the issue, according to first quarter 2019 lobbying disclosures. Some are newly formed coalitions of cannabis industry startups and investors, while others include well-established labor unions, and state credit union organizations in California, Michigan, New York and Pennsylvania. The American Bankers Association, which represents some of the largest players in financial services, is also part of the lobbying effort.
More firms may leap into lobbying in coming months for an opportunity to bank the cannabis industry, which projected to reach $80 billion in annual sales by 2030, according to equity research firm Cowen Inc.
Some entities, such as Nationwide Mutual Insurance Co. and the Credit Union National Association, are keeping their activities in-house, adding the cannabis banking bill to the laundry list of other issues they lobby on.
Others are looking to top-tier boutique lobbying firms. The American Bankers Association chose Portfield Fettig and Sears, providing a $30,000 first quarter budget to lobby in support of the bill.
Still others have tapped long-time cannabis industry lobbyists to represent their interests. The Liaison Group represents four organizations currently lobbying for the bill, including former Republican House speaker John Boehner’s organization, the National Cannabis Roundtable. In the first quarter of 2019, the Liaison Group also represented the California Cannabis Industry Association, healthcare investment fund Pura Vida, and publicly-traded Canadian medical cannabis company Acreage Holdings.
“Adopting the principles in the SAFE Act constitutes the beginning of the work necessary to formulate responsible, fair and credible policies enabling states with legal cannabis to bank, track and tax their rapidly growing cannabis economies,” Liason Group CEO Saphira Galoob said in Acreage’s 1Q19 lobbying report.
A bipartisan group of 22 senators led by Sens. Jeff Merkley (D-Ore.) and Cory Gardner (R-Colo.) introduced the Senate version of the bill April 11. The House bill, sponsored by Reps. Ed Perlmutter (D-Colo.), Denny Heck (D-Wash), Steve Stivers (R-Ohio) and Warren Davidson (R-Ohio), had 162 co-sponsors as of April 18. The House Financial Services Committee approved the bill, 45-15, on March 28 and it could reach the floor by summer.
Some groups have tapped former Republican Hill staffers in a bid to win GOP support for the SAFE Banking Act, particularly in the Senate.
The Global Alliance for Cannabis Commerce hired McGuireWoods Consulting’s Robert Wasinger, former chief of staff to former Kansas Sen. Sam Brownback (R). The firm employs other former Senate GOP staff as well.
The Mid-Size Bank Coalition of America added cannabis banking to its lobbying activities for the first time in the first quarter. The group is represented by Larry Lavender, former Republican chief of staff for the House Financial Services Committee and owner of Lavender Consultants.
Local governments have also picked up ex-GOP aides as cannabis advocates. The city of Medford, Ore., hired CFM Strategic Communication’s Kirby Garrett, former legislative assistant to House Energy and Commerce Committee ranking member Rep. Greg Walden (R-Ore.), and Joel Rubin, former legislative director to former Rep. Brian Baird (D-Wash.).
California’s Napa County similarly hired David Haines, a lobbyist for Van Scoyoc Associates and former legislative assistant to former Sen. Kay Bailey Hutchison (R-Texas), to focus on its issues, including cannabis banking.
Cannabis is fully legal in 10 states and the District of Columbia, and 47 states have legalized some form of its use.
The industry remains largely unbanked and forced to operate in cash. Only about 40 financial institutions are estimated to be working with the pot industry under close oversight by their banking regulators and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
A potential legislative solution has gained prominence this year with Democratic control of the House. Financial Services Committee Chairwoman Maxine Waters hails from California, the country’s largest market for medical and recreational use
The Republican-controlled Senate is a different story. Banking Committee Chairman Mike Crapo (R-Idaho), is from one of the few states that has not legalized marijuana for either medical or adult recreational use. He has not committed to act on the SAFE Banking Act.
But the 2020 election could put pressure on GOP senators in states where the drug is legal.
The Trump administration’s banking regulators have also joined the chorus for action. Comptroller of the Currency Joseph Otting said Jan. 16 that it’s up to Congress to decide if banks are going provide financial services to pot industry on any significant scale.
Content originally published by Bloomberg Government on April 22, 2019.
Treasury Secretary Steven Mnuchin echoed those sentiments during an April 9 House Financial Services hearing.
“This is something where there is a conflict between federal and state law that we and the regulators have no way of dealing with,” Mnuchin said.