State Financial Regulators Tell Congress To Pass Marijuana Banking Protections In Manufacturing Bill

An organization that represents state financial regulators from across the U.S. is putting pressure on Congress to pass marijuana banking reform as part of a large-scale manufacturing bill that’s currently being finalized in a bicameral conference committee.

The head of the Conference of State Bank Supervisors (CSBS) sent letters to Senate and House leaders, as well as conferees on the America COMPETES Act, on Wednesday, imploring the inclusion of language that would protect banks that work with state-legal cannabis businesses.

“By granting a safe harbor for financial institutions, Congress can bring regulatory clarity to the financial services industry, address public safety concerns and ensure access to financial services for state-compliant marijuana and marijuana-related businesses,” CSBS Acting President James Cooper said.

.@CSBSNews agrees that keeping the #SAFEBanking Act in the COMPETES Act will address public safety and regulatory clarity concerns when it comes to banking cannabis-related businesses. It’s time for Congress to pass this bipartisan legislation. https://t.co/vpamwHph7W

— American Bankers Association (@ABABankers) May 26, 2022

“I further ask for the safe harbor be extended to all financial services, including money transmission, as the adverse impact of the current inconsistency in state and federal law is not limited to depository institutions,” he said.

Cooper said a majority of states have now legalized cannabis in some form, but “due to legal and regulatory risks associated with the contradictory federal and state laws, many financial institutions remain reluctant to conduct business with cannabis-related businesses.”

“As a result, cannabis-related businesses are blocked by federal law from accessing financial services such as bank deposits, loans, money transmission and accepting credit cards for payment. This leaves marijuana businesses—legal under state law—operating largely as cash-only operations. In recent weeks, we have seen increased violent crime at cannabis businesses as criminals know these businesses keep large quantities of cash on hand.”

What CSBS and other financial associations are pushing for is that bicameral negotiators agree to put the provisions of the bipartisan Secure and Fair Enforcement (SAFE) Banking Act in the final package of the manufacturing bill that’s delivered to the president’s desk. The House did include it in its version, but the Senate removed the language.

“Enacting the SAFE Banking Act would also support economic development in states that have legalized cannabis, while enhancing safety for industry employees and the public alike,” the new letter says. “Tax collection, consumers and the financial system will remain at risk until financial institutions can serve the industry without concern of violating federal law. Clarity between state and federal law is needed to allow state-compliant cannabis businesses to access financial services without the risk of federal penalty.”

“In summary, state bank regulators support retention of the SAFE Banking Act as part of the conference report of the America COMPETES Act. Additionally, we encourage the Senate to provide a safe harbor for money transmitters to protect all industry participants by allowing them to use safe, regulated and verifiable money services. State banking regulators look forward to working with you toward passage of this important legislation.”

Banking associations representing all 50 states and one U.S. territory also sent a letter to Senate leaders late last month that made similar points about the importance of enacting the SAFE Banking Act.

Last week, a coalition of cannabis regulators representing 40 U.S. states and territories separately explained to Congress what the current lack of access to traditional financial services means—not just for the businesses and the programs they oversee, but for the regulators navigating this federal-state conflict themselves.

The non-partisan Cannabis Regulators Association (CANNRA), which doesn’t take a stand on legalization itself, sent a letter to congressional leaders, outlining areas of concern for their states’ respective marijuana markets under the status quo of federal prohibition.

Another group of marijuana regulators, Cannabis Regulators of Color Coalition, has separately weighed in on the cannabis banking conundrum, and argued in a Marijuana Moment op-ed that the SAFE Banking Act alone will not provide sufficient help for small businesses. The group says advocates should push to add provisions to the bill providing interim safeguards for Community Financial Depository Institutions (CFDIs) and Minority Depository Institutions (MDIs), as well as measures to prevent predatory lending and promote loan availability for people from disadvantaged communities.

Rep. Earl Blumenauer (D-OR), an appointed conferee on the America COMPETES Act, recently said that he feels there “tremendous momentum” to get the marijuana banking job done through their negotiations.

“We’ve got a vehicle that needs to to be acted upon relatively soon. There’s broad support for it,” the Congressional Cannabis Caucus co-chair, who led a letter to leadership late last month that stressed the urgency of enacting the banking reform, said. “I think that there’s tremendous momentum.”

The conference committee held its first meeting on the America COMPETES Act earlier this month, with multiple appointed conferees urging the body to attach the SAFE Banking Act language in the interest of economic competitiveness and public safety.

Rep. Maxine Waters (D-CA), who chairs the House Financial Services Committee and previously listed marijuana banking as a legislative priority ahead of the conference, said that the bipartisan nature of the reform proposal is “evident” based on the fact that the House included it in the chamber’s version of the manufacturing bill before it was removed in the Senate.

Additionally, nearly a quarter of all senators sent a bipartisan letter this month urging that cannabis banking be included in the final bill.

The third-highest-ranking Democratic member in the Senate, Sen. Patty Murray (D-WA), has taken special interest in marijuana banking reform, describing it as a priority of hers as an appointed member on the bicameral conference committee.

Despite continually passing though the House, the Senate has been reluctant to advance the measure under Democratic and Republican control. Current Senate leadership has insisted on passing comprehensive legalization legislation first before the cannabis banking bill.

A top aide for Senate Majority Leader Chuck Schumer (D-NY), who is working to finalize his own legalization bill, recently tempered expectations about the prospects of moving marijuana banking through the America COMPETES Act.

Asked by Marijuana Moment whether there are any specific, equity-centered policies that he’s discussed adding to the SAFE Banking Act with Senate leadership, Blumenauer said that he’d “prefer not to go into” discussions he may have had with Senate colleagues, and he put the onus on the opposite chamber to propose any specific changes that would make the legislation more palatable to them.

“They have the opportunity to move something forward, and I welcome those efforts,” he said. “I’m perfectly willing to work with them as far as they can go as long as it doesn’t get in the way of solving this.”

The standalone Senate version of the SAFE Banking Act currently has 42 cosponsors, including nine Republicans.

That reluctance on the Senate side was also the subject of a letter that SAFE Banking Act sponsor Rep. Ed Perlmutter (D-CO) sent to leadership last month.

In a previous statement to Marijuana Moment, Perlmutter pointed out that “more than two-thirds of the conferees have already voted for or cosponsored the SAFE Banking Act.”

The congressman has even made a point to talk about enacting the reform legislation during committee hearings on ostensibly unrelated or wider-ranging legislation, like at a recent House Rules Committee hearing.

Despite recently saying that he’s “confident” that the Senate will take up his bill this session, Perlmutter recognized that while he’s supportive of revisions related to criminal justice reform, taxation, research and other issues, he knows that “as we expand this thing, then we start losing votes, particularly Republican votes and we got enough votes in the Senate to do it” as is.

Meanwhile, the governor, attorney general and other top officials in Washington State sent a letter to congressional leaders earlier this month, again emphasizing the urgent need to pass marijuana banking reform as a public safety imperative.

Separately, Washington State officials also recently held a virtual roundtable to address the spate of deadly robberies targeting marijuana retailers, with regulators reiterating their call for a federal policy change and discussing steps the state can take on its own while Congress fails to act.

Washington State’s treasurer has been especially vocal about the need for congressional reform, and he wrote in a recent letter to his colleagues in other states that it’s “just not safe to have this financial volume in cash.”

He made similar remarks at a recent conference of the National Association of State Treasurers (NAST). And Colorado Treasurer Dave Young echoed that sentiment in a recent interview with Marijuana Moment.

In the absence of congressional action, more states are moving to enact marijuana banking reform policies on their own. For example, Pennsylvania House lawmakers filed a companion bill to a Senate-passed measure late last month that would provide banking protections and tax relief for marijuana businesses.

Meanwhile, the number of banks that report working with marijuana businesses ticked up again near the end of 2021, according to recently released federal data.

It’s not clear if the increase is related to congressional moves to pass a bipartisan cannabis banking reform bill, but the figures from the Financial Crimes Enforcement Network (FinCEN) signal that financial institutions continue to feel more comfortable servicing businesses in state-legal markets.

Some Republicans are scratching their heads about how Democrats have so far failed to pass the modest banking reform with majorities in both chambers and control of the White House, too. For example, Rep. Rand Paul (R-KY) criticized his Democratic colleagues over the issue in December.

Read the CSBS letter to congressional leaders on marijuana banking and the America COMPETES Act below: 

California Officials Launch New Marijuana Map Revealing Which Areas Are Still Blocking Businesses