Imagine a legal billion-dollar industry in Washington that is shunned by banks. Proprietors cannot secure loans, accept credit card payments or access payroll services. Customers have to make a stop at the ATM before visiting the store.
That is the case with Washington’s burgeoning marijuana industry, which remains an all-cash endeavor. Although voters approved recreational marijuana in 2012 and retailers set up shop two years later, banks still treat the industry as though it is the back-alley pariah of yore. Because marijuana remains illegal under federal law, bankers are understandably wary of risking the wrath of federal regulators.
That might be changing — as it should. While marijuana legalization should be left up to each state, legitimate businesses in states that have approved cannabis should be allowed to operate as other companies do. That covers a lot of territory; 33 states have approved medical marijuana, and 10 of those, along with the District of Columbia, have approved recreational marijuana.
Now, Congress is considering the Secure and Fair Enforcement Banking Act of 2019 (H.R. 1595), which would allow banks to serve marijuana businesses without fear of reprisal. The measure has broad support, with 184 co-sponsors in the House, including eight of Washington’s 10 representatives (Jaime Herrera Beutler, R-Battle Ground, is not a co-sponsor). The bill recently passed the Financial Services Committee by a 45-15 vote and is expected to be brought to the floor next month.
Another solution to the issue might be budding in California, where the state Senate has approved the establishment of state-chartered cannabis banks. But Congress still should take the lead in allowing financial institutions to do business with legitimate companies.
Approving banking services for cannabis growers and shops should not be conflated with approval of marijuana. Even the American Bankers Association writes: “While the ABA takes no position on the moral issues raised by legalizing marijuana … ABA believes the time has come for Congress and the regulatory agencies to provide greater legal clarity to banks.”
The need has been echoed in congressional testimony. Gregory Deckard of Spokane Valley-based State Bank Northwest told lawmakers: “We have a major energy provider. Naturally, their customers include cannabis-related businesses. For that reason alone my bank cannot bank this utility without assuming legal risk and additional compliance burdens.”
Legislators also heard tales of the risks of all-cash businesses. In California, the state’s treasurer said, cannabis companies have dropped off duffel bags and suitcases full of cash to pay their taxes. And Rep. Denny Heck, D-Olympia and a co-sponsor of the bill, said: “We have the power in this committee to prevent murders and armed robberies and we must use it. We must use it now.”
That might or might not be a bit of hyperbole, but the situation does seem to be generating unnecessary risks.
It also is generating unnecessary inconveniences. If customers had to use cash every time they stopped for their favorite pint of microbrew, we’re guessing that Congress would get an earful.
State Treasurer Duane Davidson said: “This is not about legalizing cannabis nationwide … this is about creating a safer cannabis industry by allowing these mostly cash-based businesses to bank with their local financial institutions.”
Congress should embrace that reasonable position.