A bipartisan group of attorneys general from 33 states and five territories have sent a letter to Congress calling for swift passage of the Secure & Fair Enforcement (SAFE) Banking Act — legislation that would reform banking regulations affecting institutions that handle cannabis-related accounts.
The May 8 letter notes that a major new industry is currently barred by federal law from accessing financial services and states that passage of the SAFE Banking Act would serve the aims of “protecting public safety and bringing grey market financial activities into the regulated banking sector.”
All in all, 33 states and several U.S. territories have legalized medical marijuana. “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 federal Controlled Substances Act and certain federal banking statutes,” the letter says. “This risk has significantly inhibited the ability of financial institutions to provide services to these businesses and companies.”
Contradiction Between State and Federal Law
The letter stresses that “[d]espite the contradictions between federal and state law, the marijuana industry continues to grow rapidly. Industry analysts estimate 2017 sales at $8.3 billion and expect those totals to exceed $25 billion by 2025. Yet those revenues are handled outside of the regulated banking system.”
The AGs note that this disparity has absurd consequences: “Businesses are forced to operate on a cash basis. The resulting grey market makes it more difficult to track revenues for taxation and regulatory compliance purposes, contributes to a public safety threat as cash-intensive businesses are often targets for criminal activity, and prevents proper tracking of billions in finances across the nation.”
The letter also emphasizes that the signatories are not endorsing “the legalization of medical or retail marijuana in those jurisdictions that choose not to pursue such an approach.” Nonetheless, “the reality of the situation requires federal rules that permit a sensible banking regime for legal businesses.”
The SAFE Banking Act would create a “safe harbor” for financial institutions that service the cannabis industry. “An effective safe harbor would bring billions of dollars into the banking sector, enabling law enforcement; federal, state and local tax agencies; and cannabis regulators in 33 states and several territories to more effectively monitor cannabis businesses and their transactions.”
A Cash Industry in a Digital World
One glaring absurdity of the status quo is that the booming cannabis industry is heavily reliant on cash in a world economy that is fast going cashless. National Public Radio last month ran a report on the dilemma, tellingly entitled “Bags of Cash, Armed Guards
Profiled is Tom DiGiovanni,
Along with prominent signatories such as Xavier Becerra of California and Letitia James of New York, the attorneys general letter was signed by Edward Manibusan of the Northern Mariana Islands, which last year became the first U.S. territory to legalize cannabis;
The SAFE Banking Act is currently before the House Subcommittee on Crime, Terrorism, and Homeland Security, having already cleared the House Financial Services Committee in March. The bill’s co-sponsor, Rep. Ed Perlmutter, a Colorado Democrat, tweeted his appreciation for the attorney’s general letter. “This support underscores the need to get cash off our streets and allow legitimate cannabis businesses access to the banking system once and for all,” he wrote.
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