California Treasurer Fiona Ma pleaded with federal lawmakers Wednesday to enact safe harbor legislation aimed at encouraging more banks and credit unions to accept state-licensed marijuana businesses as customers.
Ma, testifying before the U.S. House subcommittee on consumer protection and financial institutions, noted that California has explored creating its own public bank and authorizing a closed-loop banking system as alternatives to the cash-dominated cannabis market that exists today.
None of those proposals are preferable, Ma said, to federal legislation that would shield existing depositories from prosecution under money laundering laws.
“Having a safe harbor for banks is probably the most expeditious way of getting more folks out of the black and gray markets and into the legitimate markets,” Ma said.
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Wednesday’s hearing was the first of its kind in the House, where years of recent Republican control tamped down any discussion of bills addressing state-legal marijuana. Rep. Maxine Waters, D-California, now chairs the Committee on Financial Services and has indicated she’s willing to entertain legislation aiding regulated cannabis.
Waters made a brief appearance at the subcommittee hearing, saying she wanted to witness Rep. Ed Perlmutter’s “moment in the sun on this issue based upon all of the time and the effort that he’s put into the cannabis issue.”
Perlmutter, a Colorado Democrat, has previously introduced legislation to encourage marijuana banking only to watch the bills die without a hearing. He and a trio of bipartisan lawmakers have re-introduced banking legislation this year.
“Today’s hearing is a big deal,” Perlmutter said. “It’s a big deal for thousands of employees and businesses across this country who have been put at risk because they are forced to deal in piles of cash while Congress stuck its head in the sand for the last 20 years.”
Perlmutter’s bill, the Secure and Fair Enforcement Banking Act, would bar banking regulators from sanctioning financial institutions that serve “legitimate” cannabis businesses. The bill would also explicitly allow banks to set up accounts for companies that do business with marijuana operations, such as law firms and utilities.
“In Washington state there are three banks and three credit unions that provide banking services to the cannabis industry,” said Gregory Deckard, president of State Bank Northwest in Spokane, Washington. “There are several other banks in the state that, if there was some clarity provided and a safe harbor created for institutions, there would be more entrants into the cannabis banking market.”
Through September 2018, 375 banks and 111 credit unions across the country provided services to marijuana-related businesses, according to the U.S. Treasury’s Financial Crimes Enforcement Network.
Republicans on the subcommittee criticized Perlmutter’s legislative proposal, arguing that advocates should pursue marijuana’s declassification as a Schedule 1, potentially addictive drug before seeking more banking access.
“We must remember that we’re dealing with an illegal industry on the federal level,” said Rep. Blaine Luetkemeyer, R-Missouri. “As far as I know the House Financial Services Committee does not have jurisdiction over descheduling a drug. And in my opinion we’re putting the cart before the horse in addressing this issue here.”