Congressman Ed Perlmutter isn't a rapper, but if he were, "Cannabis Banking or Die Trying" would be a great name for his first mixtape.
Since 2013, Perlmutter has been trying to pass federal protections for banking and financial institutions serving state-legal marijuana industries, and he made another push on March 18, reintroducing his SAFE Banking Act in the U.S. House of Representatives.
Because marijuana businesses work with a federally controlled substance, they're often forced to operate in cash, as many financial institutions fear running afoul of the feds. Although there are several state-chartered banks and credit unions currently serving marijuana businesses in Colorado, these services come at a higher risk for the institutions — and, in turn, a much higher cost for the marijuana business, according to bankers serving the pot trade. But as commercial marijuana continues to gain approval in states across the country, more state and national politicians are calling on the federal government to address the issue.
“The genie is out of the bottle, and has been for many years. Thousands of employees and businesses across this country have been forced to deal in piles of cash for far too long, and it is the responsibility of Congress to step up and take action to align federal and state laws for the safety of our constituents and communities. The public safety need is urgent, and a public health and economic need has also emerged with the pandemic further exacerbating the cash-only problem for the industry,” Perlmutter said during the bill's reintroduction on March 18. “In many states, the industry was deemed essential yet forced to continue to operate in all cash, adding a significant public health risk for businesses and their workers. As we begin our economic recovery, allowing cannabis businesses to access the banking system would also mean an influx of cash into the economy and the opportunity to create good-paying jobs."
Perlmutter's efforts have started gaining support among his colleagues over the last few years, with the Democrat-led House even passing the Safe Banking Act in 2019. However, the Republican-controlled Senate at didn't hear the bill at the time, and while subsequent attempts to attach Safe Banking language to COVID-relief bills were successful in the House, they were blocked in the Senate. Now that Democrats hold the majority in both chambers, though, Perlmutter might find the support he needs.
In a statement released after the most recent introduction of Safe Banking, Governor Jared Polis called on Congress to support the bill. A former U.S. Representative, Polis co-sponsored the Safe Banking Act during his time in Congress. Since he became governor just over two years ago, Colorado dispensaries have sold over $4.1 billion worth of marijuana products. Since recreational sales began in 2014, the state has seen a total of $10.2 billion in sales.
“I’m thrilled that this important legislation is once again being brought before Congress. It is critical that we legitimize cannabis businesses, many of which have been in operation for over a decade, by allowing them to interact in a transparent and legal fashion with our state and federally chartered financial institutions. Cannabis industry dollars should flow through the banking system like any other state-regulated commodity, which in turn will create another layer of regulation and significantly enhance public safety," Polis says in his statement. "I want to thank my former colleague, Representative Ed Perlmutter, for his work to champion this bill. I supported this as a Congressman and now as Governor of the first state in the country to regulate adult use of cannabis, I urge the House to pass this bill quickly and send it on to the Senate.”
Since Polis became governor, the Colorado Department of Regulatory Agencies has been working to provide more clarity for financial institutions interested in marijuana clients, sending out a checklist of compliance expectations for marijuana bankers under the Banking Secrecy Act and offering similar guidance for financial institutions serving the hemp industry. Over the past two years, DORA has also reviewed state money transmitter requirements in regard to marijuana businesses, released a guide for state regulators to assist in oversight of marijuana finance, and updated chartering requirements for marijuana businesses.
Piles of cash are still very much a part of Colorado's marijuana industry, but more banks, credit unions and other financial institutions are starting to get involved. Since it began accepting marijuana business, the Colorado Credit Union's Safe Harbor Private Banking branch has seen annual pot-related deposits go from $153 million in 2015 to over $3 billion by the end of 2020, according to the company.
The majority of larger marijuana businesses with operations in multiple states have had access to banking for several years, but Perlmutter's bill would also eliminate the IRS tax code 280E, which bans legal marijuana businesses from receiving federal tax reductions despite paying taxes. More official federal protections and more tax relief could play an important role in opening up commercial marijuana to bigger investment and funding options
"We've had access to banking for years in almost every market we are in. I think when most people think of banking, they think of depositing cash, writing checks for inventory and payroll: the day-to-day stuff, which we have had for years," says Chris Driessen, president and CEO of Denver-based marijuana conglomerate Slang Worldwide. "The real shift will be in the type of investor that would be able to come into the market. When institutional money starts to flow into American cannabis companies, like it already has for federally legal Canadian cannabis companies, that's when you will see a massive jump in scale and, ultimately, value."
But Driessen is also used to hearing about marijuana momentum in Congress that has subsequently met with little tangible success, and he isn't holding his breath on this push.
"I don't get too excited with whatever the latest news is out of Washington, D.C.," he explains. "Both parties have had ample opportunity to adopt a pro-cannabis platform and, more important, act on it. To date, neither party has done much to advance federal legalization."
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