Senate Committee Holds Hearing On Latest Pot Banking Bill While Industry Watches And Waits

The banking problem remains a formidable challenge for cannabis businesses. Banks won't work with them due to the federal illegality. This ban applies even if marijuana firms are in legal states because financial institutions don't want to be accused of money-laundering by the government. As a result, many businesses are forced to become cash-only operations, rendering them vulnerable to theft and other criminal acts. It's a frustrating catch-22 situation.

Although some operations find refuge with credit unions while others deposit cash in a safe or contract a cash holding company, traditional banks are still the optimal solution to an issue that continues to plague the industry. With so much potential profit on the line—the latest estimates from marijuana researchers The ArcView Group and BDS Analytics, projects $22.2 billion for both the recreational and medical markets by 2022—banking, government and industry representatives are clamoring to remedy this situation.

The latest Congressional attempt is the Secure And Fair Enforcement (SAFE) Banking Act.  Sponsored by Sen. Jeff Merkley (D-OR), the proposed legislation would prevent federal banking regulators from sanctioning banks for working with legal cannabis businesses. Also, the bill would protect ancillary businesses that work with the cannabis industry from being charged with money laundering and other financial crimes. Currently, the bill has 31 co-sponsors in the Senate.

(The House companion bill, H.R. 1595, was introduced in February by Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH), and Warren Davidson (R-OH). Currently, it has 206 cosponsors. A full House vote is expected on the bill in the coming months.)

Today the Senate Committee on Banking, Housing and Urban Affairs will hear testimony from representatives of the cannabis and financial services industries on the need to pass the SAFE Banking Act. The prospect is stirring much hope and excitement among industry movers and shakers.


Said Edward Fields, CEO of DionyMed Brands, a multi-state cannabis brands platform, “This discussion is extremely important and long overdue. Forcing legitimate, law-abiding businesses to operate in a cash-only way actively creates real-life danger. At the end of the day, this issue directly affects the safety of our employees, and it’s an absolute moral and ethical failure for Congress to continue to expose Americans operating in state-legal industries to the potential for criminal violence...This sort of thing doesn’t happen in the liquor or tobacco industries, and it shouldn’t happen to cannabis.”

Matt Hawkins, managing partner of cannabis-focused investment firm Cresco Capital Partners, predicts positive ramifications for the industry once banks become more accessible to cannabis businesses. "We could potentially see a heavy influx of cannabis-related IPO registrations to the New York Stock Exchange and NASDAQ," he said. "This bill would also open the floodgates for the billions of dollars in revenue generated from the industry to be integrated into the federal banking system. Taxation and money transfers will become smoother and quicker, and this will ultimately allow for loans to be issued to business owners, as well as workers in the industry who would then be able to more easily acquire loans for education, housing and more.”

Not all are so easily swayed. Although Arnaud Dumas de Rauly, co-founder and CEO of New York City-based The Blinc Group, a maker of cannabis vaping hardware, felt that “The SAFE Banking Act, while still not the perfect avenue,” could lend legitimacy to the industry, he can’t help but view the situation through a realistic lens. “On the flip side, even if the act leaves the committee and ultimately passes, will banks put their necks on the line and risk their current portfolios while cannabis is still federally illegal?”

That is a question to ponder. Stay tuned.

Content originally published by Forbes on July 23, 2019.

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