Marijuana-friendly states ask Congress to ease banking access for the cannabis industry
In a statement, California Attorney General Xavier Becerra cited the Trump administration’s increased pressure on states with legal marijuana as a significant obstacle to an industry that is already generating hundreds of millions of dollars in tax revenue across states that enacted legalization.
“Congress has the power to protect a growing $6.7 billion industry and the public safety of our communities,” Becerra said in a statement today. “My team at the Department of Justice is committed to implementing and enforcing the law in California in a way that most effectively protects the health and safety of our people.”
The industry was shaken recently by Attorney General Jeff Sessions’ decision to rescind Obama-era Justice Department guidance around state and federal tension around the issue, informally known as the “Cole memo.” That guidance acknowledged that while marijuana remained illegal on the national level, federal prosecutors could deprioritize enforcement on the issue, leaving the states to handle legality for themselves.
“There is still a lot we don’t know about what enforcement priorities the Justice Department will implement,” Colorado Attorney General Cynthia H. Coffman said in a statement at the time. “I expect, however, that the federal government will continue to focus their enforcement efforts and resources on combatting the gray and black markets and diversion, and not target marijuana businesses who abide by our state’s laws.”
While some state leaders aren’t nervous yet, the shift has made skittish some marijuana-focused businesses and states that are enjoying the tax benefits. Without protective legislation from Congress, a working relationship with the banking industry is out of reach and increased scrutiny from the Justice Department seems imminent.
Here is the letter:
Dear Congressional Leaders: We are a bipartisan group of state attorneys general who recognize that the states and federal government share a strong interest in protecting public safety and bringing grey market activities into the regulated banking sector. To address these goals, we urge Congress to advance legislation that would allow states that have legalized medical or recreational use of marijuana to bring that commerce into the banking system.
Twenty-nine states and several U.S. territories have legalized the medical use of marijuana. Among those, eight states and the District of Columbia, also allow recreational use by adults over 21 years of age. However, because the federal government classifies marijuana as an illegal substance, banks providing services to state-licensed cannabis businesses could find themselves subject to criminal and civil liability under the Controlled Substances Act and certain federal banking statutes. This risk has significantly inhibited the willingness of financial institutions to provide services to these businesses.
Despite the contradictions between federal and state law, the marijuana industry continues to grow rapidly. Industry analysts report that sales grew by 30% to $6.7 billion in 2016 and expect those totals to exceed $20 billion by 2021. Yet those revenues often exist outside of the regulated banking space. Businesses are forced to operate on a cash basis. The grey market makes it more difficult to track revenues for taxation purposes, contributes to a public safety threat as cash intensive businesses are often targets for criminal activity, and prevents proper tracking of large swaths of finances across the nation.
To address these challenges, we are requesting legislation that would provide a safe harbor for depository institutions that provide a financial product or service to a covered business in a state that has implemented laws and regulations that ensure accountability in the marijuana industry such as the SAFE Banking Act (S. 1152 and H.R. 2215) or similar legislation. This would bring billions of dollars into the banking sector, and give law enforcement the ability to monitor these transactions. Moreover, compliance with tax requirements would be simpler and easier to enforce with a better-defined tracking of funds. This would, in turn, result in higher tax revenue.
Prior Department of Justice guidance outlined how financial institutions could provide services to state-licensed marijuana businesses consistent with their obligations under federal law and created some space for the banking industry to work with those businesses, though challenges remained in many areas. The recent rescission of that guidance has made the need for Congressional action to get the cash generated by this industry into a regulated banking sector even more urgent.
Our banking system must be flexible enough to address the needs of businesses in the various states, with state input, while protecting the interests of the federal government. This includes a banking system for marijuana-related businesses that is both responsive and effective in meeting the demands of our economy. We look forward to working with you as you move forward in this process and lending our voice and expertise as you develop legislation.
Signed by Attorneys General of Alaska, District of Columbia, Hawaii, North Dakota, Colorado, California, Guam, Illinois, Iowa, Connecticut, Maryland, Maine, Massachusetts, New Mexico, New York, Oregon, Pennsylvania, Vermont, Washington.