First Congressional Marijuana Vote of 2019 to Consider Banking Bill

A bipartisan bill designed to create a safe harbor for banks and credit unions that service the marijuana industry will become the first cannabis bill to face a key congressional committee vote in 2019. 

A version of the legislation, known as the Secure and Fair Enforcement (SAFE) Banking Act, has been introduced in every congressional session since 2013, but previous efforts failed to even secure a congressional hearing. The bill would introduce protections for banks that would let them service the marijuana industry without fear of federal penalties, and thereby allow those in the marijuana industry to use the banks for their business instead of being forced to operate only in cash.

Last month, the House, newly under Democrat control after eight years of a Republican majority, announced the SAFE Banking bill would finally be given a congressional hearing in front of the Consumer Protection and Financial Services Subcommittee. The hearing took place on February 13. 

Now, the House has scheduled the bill for a vote next Tuesday, March 26, before the House Financial Services Committee. This will make it the first cannabis-related vote of the new congressional session. The bill has already gathered bipartisan support; both prominent Democrat and Republican members of the House have signed on as cosponsors of the legislation. The bill is chiefly sponsored by Reps. Ed Perlmutter (D-Colo.), Denny Heck (D-Wash.), Steve Stivers (R-Ohio) and Warren Davidson (R-Ohio).

Key moments from the banking bill’s first hearing

In the hearing, members of the Consumer Protection and Financial Services Subcommittee heard testimony from cannabis industry experts who explained the struggles cannabis business experience on account of having to operate as cash-only business and the danger that this can often put employees in. Since cannabis businesses cannot use the banks, experts remarked, they often have to keep large amounts of cash on the premises in order to pay employees or deal with expenses and taxes, and this can make cannabis businesses and employees easy targets for crime.

In a powerful opening statement, Rep. Denny Heck recounted one particularly tragic case from his home state, where a security guard at a cannabis dispensary was killed during an armed robbery.

“Today, after six years, we finally have a hearing, and it comes too late. Too late to prevent dozens of armed robberies in my home state of Washington. Too late for Travis Mason… a 24-year-old Marine veteran in Aurora, Colorado, who reported for work as a security guard [at the] Green Heart Dispensary on June 18, 2016 and was shot dead that night by an armed robber.”

“We have the power in this committee to prevent murders and armed robberies,” Heck remarked, referring to the allure of cash-only operations for criminals. “We must use it and we must use it now because we are already late.”

Experts from outside of the cannabis industry also spoke in the hearing. Major Neill Franklin (Ret.), who is the Executive Director of the Law Enforcement Action Partnership (LEAP) and also a former Maryland police officer, told the hearing attendees that the current laws “encourage tax fraud, add expensive monitoring and bookkeeping expenses and, most importantly, leave legitimate businesses vulnerable to theft, robbery and the violence that accompany those crimes.”

“I’m not one for fear mongering,” Franklin continued. “What I testify to here today is rooted in experience and research. Any police officer who has worked the street, or investigated enough robberies, will testify to the same regarding any business forced to handle large amounts of cash.”

The bill did encounter some pushback over the course of the hearing. Jonathan Talcott, the chairman of the anti-legalization nonprofit Smart Approaches to Marijuana, told the subcommittee that he would “speak on behalf of people who have been the victims of cannabis” before going on to tell the story of his sister, who he says developed schizophrenia and died shortly after she began using cannabis, and of his cousin, who used marijuana and then died of an opioid-induced heart attack. 

After recounting these personal experiences, Talcott then went on to explain his opposition to any change in cannabis-related banking operations, stating that he believes banking rules should not be altered while cannabis remains a Schedule 1 drug. 

“I think you really need to address the Controlled Substances Act and its prohibition of marijuana before any of the proposed changes and safe harbors would be effective,” Talcott explained. “We need to be very careful about how we proceed. If we want to discourage the black market, which I think we all do, then we need to be much more straightforward about how we approach this issue. We need to change the scheduling of marijuana — if that’s what people want to do — and then go about putting in place the proper banking regulations.”

Banking and the cannabis industry

Banks and credit unions are required to comply with federal guidelines when providing financial services. So long as cannabis remains federally illegal in the United States, this means all cannabis-related transactions must be formally considered illegal activity. As a result, thousands of mandatory suspicious activity reports are annually being filed with federal regulators whenever there is activity in a cannabis industry account. 

Rachel Pross, the chief risk officer of the Oregon-based Maps Credit Union, told the subcommittee at the hearing that Maps had filed over 2,700 suspicion activity reports with federal regulators over the past two years, with a massive 90 percent of those reports involving customers in the cannabis business. 

A letter was also submitted to the subcommittee from David Damschen, the state treasurer for Utah, which also addressed the burden these reports put on financial regulators. Originally addressed to the congressional delegates for Utah, Damschen’s letter explained that easing access to the banking system for legitimate cannabis business would result in law enforcement and financial regulators being better able to distinguish between legal and illegal account activity.

Can the bill make it through Congress?

Making it so far as a hearing was already a historical moment for cannabis banking reform efforts, but supporters of reform will also be optimistic at the bill’s ability to make it even further. 

At the time of writing, the bill has 138 cosponsors — more than a quarter of the House — and the chairs of the House Financial Services Committee, House Judiciary Committee, and the House Rules Committee are also known to be in favor of the bill. With such strong bipartisan support from representatives, it is expected that the bill will be able to easily pass through the House Financial Services Committee vote that is scheduled for next week, onwards out of committee and through the House. 

If the bill does successfully make it passed the House, it will face a wave of fresh challenges in the Senate. While the Democrats now control the House, the traditionally anti-marijuana Republican party have held the majority in the Senate since 2011, and while the Senate Appropriations Committee has approved a number of cannabis-related proposals in the past, the Committee did rule against the version of the SAFE Banking Act that was brought in the last congressional session.