In a Jan. 16 letter to Speaker of the House Paul Ryan, the Senate Banking Committee, and other influential members of Congress, a coalition of state attorneys argues for easing federal restrictions on banks that take on customers associated with the burgeoning marijuana industry.
“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,” the AGs wrote. “ 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.”
The letter argues that 29 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,” the letter says. “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 percent 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 letter says. “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.”
The AGs 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,” they wrote.
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. 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, the authors say.
AGs signing the letter hail from the states of Alaska, Hawaii, California, District of Columbia, North Dakota, Colorado, Connecticut, Illinois, Maine, Massachusetts, New York, Pennsylvania, Washington, Iowa, Maryland, New Mexico, Oregon, and Vermont.