A full-committee vote will happen in the next two weeks from efforts by the House Financial Services Committee, led by Rep. Maxine Waters (D-CA). Originally convened on the February 13th, the subcommittee has jump-started the process to move the marijuana banking bill through Congress. For the first time since 2011, the Democrats have the majority in the House of Representatives, and it appears that reforming federal marijuana laws is one of their highest priorities. While 33 states so far have legalized medical and recreational use, cannabis remains federally prohibited, further complicating the implementation and regulation of the nation’s growing legal marijuana industry. Congressional Democrats scheduled hearings on the challenges legitimate marijuana businesses face in obtaining bank accounts because many financial institutions fear they’ll be found in violation of federal money laundering and drug laws.
Reason for the accelerated timetable is House Democrats first proposed legislation to address the issue six years ago, and several times since, but the GOP majority prevented any further progress. “We warned that forcing these businesses to deal in cash was threatening public safety,” Rep. Denny Heck (D-WA) told Forbes about the marijuana banking legislation he and Rep. Ed Perlmutter (D-CO) co-sponsored. “No hearing was given. … Chairwoman Waters has made it one of her priorities to address this urgent and overdue issue, demonstrating that she understands the threat to public safety and the need for Congress to act.”
Heck went on to say that he is working on refining a new version of the bill, which he described as “a bipartisan proposal to allow well-regulated marijuana businesses to handle their money in a way that is safe and effective for law enforcement to track.” The bill would protect banks from being punished for working with licensed marijuana businesses in states that have legalized.
For the previous two terms, the Republican-controlled House of Representative blocked most measures to reconcile the challenges presented by inconsistent state and federal cannabis laws, and also discouraged members from proposing marijuana-related amendments to larger pieces of legislation. Now that House Democrats are in power, many believe the February 13th hearing will be just the start of a concerted effort to advance broad, much-needed reforms of federal marijuana laws — possibly even with full legalization in mind. In a memo to party leaders last year, Rep. Earl Blumenauer (D-OR) suggested a progressive, step-by-step approach that begins with incremental reforms to banking access and research expansion, before proposing broader legislation that would end federal prohibition entirely. It remains to be seen whether that’s the plan Congressional Democrats have in mind, but so far, they’re off to an encouraging start.
The issue behind the cannabis bank account noise:
Adult use marijuana has been legally sold in California since the start of the year. The state treasury estimates that sales in 2018 will reach $7bn. But it will not collect its fair share, because pot taxes, it turns out, must be paid in cash. This makes tax collection “a nightmare,” as the Treasury has described it. The predicament of Oregon, where recreational pot became legal in 2015, is a case in point. Sellers who declare sales have had to bring tax payments in cash every month to a safe, bulletproof site in Salem, the state capital, no matter the distance they must travel. Operating only one such “cash-transaction unit” saves the revenue department money, but it also reduces the number of sellers who declare sales. So why can’t tax payments be made electronically?
Nearly two-thirds of America’s states have legalized pot sales for specific uses, but the federal government still classifies marijuana as a “Schedule 1” drug, on a par with heroin. Banks that handle marijuana money can be charged with money laundering. Pot businesses, therefore, are on the whole stuck working with cash, which causes problems for more than just tax collection. For starters, cash operations are inefficient.
One obscured example: To pay its staff of 200 in cash, CannaCraft, a Californian maker of marijuana products, requires four employees who would otherwise be unneeded. Businesses restricted to cash are “targets for assaults” that endanger the public, laments California’s treasury. And as firms accumulate untraceable cash, some will offer bribes for operating permits, says Fred Timpner, head of the Michigan Association of Police. He expects recent arrests for such corruption in his state to be followed by more.