The Senate Banking Committee approved a historic marijuana banking bill last week that breaks barriers between financial institutions and cannabis companies.
The Secure and Fair Enforcement Regulation (SAFER) Banking Act, which aims to resolve a longstanding financial deadlock that forced cannabis-related companies to operate using only cash, will now make its way to the Senate floor. Iterations of this bill have been presented in committee since 2015, but this is the first time the bill has received a yes vote and made its way to the Senate at large.
As the marijuana market flourishes across the US, federal legal ambiguity has hindered its full potential, making transactions an all-cash, risky affair.
The legislative road ahead is tough, despite the bipartisan majority in committee, but this bill could redefine the business of marijuana.
Before the Bell spoke with Senator Jeff Merkley, a Democrat from Oregon and a sponsor of the bill, about what comes next.
This interview has been edited for length and clarity.
Before the Bell: You first introduced a version of this bill in 2015; why do you think that it's taken nearly eight years to get it this far?
Senator Jeff Merkley: More and more states have created medicinal cannabis programs or recreational cannabis programs over those eight years. The issue and problems of a pure cash economy have grown across the country, and more senators are aware of the challenges in their home state. That has slowly built the level of concern and attention to a point where we think a significant majority of the Senate will now support changing things.
In Oregon we have a robbery at a dispensary about every other day because the dispensaries are full of cash. Employees are mugged when they come out of their offices because people think they're carrying cash. A cannabis business owner drove from Portland to Salem to deliver his taxes, and he had a backpack with $70,000 cash in it. More of the country has seen the problem and has built a coalition, and now we're ready to play.
What do you hear from the banks? Are they on board?
Banks have been in a difficult position because they have had to sever the relationship they have with longstanding clients. If they do business with a company that provides fertilizer to 200 places and one of them is a cannabis company, they have to cancel that bank account. That's an enormous inconvenience. There are some institutions, including some credit unions, that provide services, but their fees are much higher than for any other commercial enterprise.
Could the cannabis industry be big business for banks?
It's a billion dollar business in Oregon. That's a significant opportunity for banks to provide services. Over the last few years folks have questioned whether this bill is all about big banks wanting to enter the marketplace. I have never heard from any of the banks on Wall Street about this. What I've heard is that small businesses are struggling because their ability to use the banking system has been canceled.
Is this a first step to cannabis tax reform or rescheduling the drug?
It is one of three big issues surrounding us. You have the provision of banking services, then you have the fact that cannabis is scheduled as a top level concern whereas meth, which is savaging our communities, is not. And then you have the tax provisions. Currently these businesses pay on their gross revenue and not their net revenue, and that's crazy. If your revenue is a million dollars and your expenses are a million dollars, you have zero profits. But you have to pay taxes as if you had a million dollars in net profits. But I don't see them as dominoes like one affects the other.
Why is part of this bill about reputational risk?
This bill sends a message to regulators that they should never tell a bank to shut down an account because they don't like the type of business that the bank is holding that account for. So that's a second piece of this bill, section 10, is saying to regulators, 'you are not moral police.' If a company is legal and they don't have financial concerns, then it's improper to tell them to shut down the account for that business.
The third part of the bill focuses on restorative justice. This has been very important because the cannabis prosecutions have been absolutely unjust. White Americans and Black and brown Americans use cannabis at about the same rate, but the prosecution of brown and Black Americans has been basically four times that of White Americans — giving them criminal records and disrupting their lives with jail time. This bill includes the start of addressing that. It says that first we will look carefully through a report on equity and diversity in the cannabis industry. Second of all, we will require data collection related to veteran-owned businesses, small businesses and women- and minority-owned businesses.
Third, it will say that income related to cannabis is completely appropriate for use in federally backed mortgages, so people can become homeowners who were blocked from becoming homeowners. And then fourth, it says that community development financial institutions and minority depository institutions are fully legal in serving cannabis dispensaries and their subcontractors.
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