Republican and Democrats can’t agree on much, but there may be some common ground on a piece of legislation that both respects federalism while allowing legal businesses to use financial services in a legally complicated area – cannabis.
There is expected to be a vote in the House this week on the bipartisan SAFE Banking Act that will allow financial institutions to provide services to state-authorized cannabis businesses. Passage of this bill will both forward the ball on federalism and get our federal laws closer to state laws with regard to cannabis.
Right now, there is a conflict of laws between the federal prohibition on cannabis and a number of states that have allowed different levels of legal use. There are 33 states that allow medical cannabis and 10 states that allow adult and medical. The lack of legal clarity for these states has pushed banks and financial institutions that provide credit card services to legal businesses to stay far away from state-authorized cannabis companies. This conflict can’t stand, and Congress is slowly moving toward enabling states to make the decisions on this issue.
Republicans have embraced the idea of federalism. Federalism is the idea that the state, not the federal government, holds the powers not enumerated to the federal government. The states and local governments have traditionally conducted police powers, yet there has been a creeping federalism of these police powers over the history of this nation. Cannabis laws were federalized when the federal government passed the Controlled Substances Act (CSA) in 1970. Before then, the states were in control.
There are many interests who want to remove the conflicts of laws, because the current conflict is having real-world consequences and putting Americans in danger. Randal John Meyer, Executive Director of the Global Alliance for Cannabis Commerce (GACC), submitted testimony to the Senate Banking Committee making the argument that the current state of the federal law is creating a public safety risk for those in the cannabis industry. “Because legal cannabis businesses must operate with a surplus of cash, their leadership and employees have become the targets of violent criminals. The risk of such employees being robbed, kidnapped, extorted and even tortured is tragically real. The federal government must reckon with the danger employees and owners of state-licensed businesses face.” Makes no sense to put Americans in danger because they are working in a state-authorized line of work.
Financial crimes are another area that this bill will help solve. Meyer made the case that financial crimes are not being found because cannabis commerce is done in cash. “The current state of cannabis banking undermines the ability of the Financial Crimes Enforcement Network (“FinCEN”) to crack down on money laundering” because “keeping capital from lawful cannabis businesses outside of the banking system makes it impossible for banks to report suspicious activities, and for FinCEN to respond.” Passage of the SAFE Banking Act will help to weed out money laundering and other illegal activities.
There is growing Republican support for federalism in cannabis laws and it is expected that the SAFE Banking Act is one of the few pieces of significant legislation that may make it to the president’s desk this year with Republican support. Many liberty-minded Republicans recognize that local and state governments are the proper place to make decisions and they support this effort. Just look at the bipartisan vote on the floor of the House earlier this year as evidence of the shift in Republicans’ view on the issue.
An amendment drafted originally by Rep. Tom McClintock (R-CA) passed the full House that prevented the federal government from prosecuting individuals and corporations in states that have allowed medical and adult-use cannabis. The Blumenauer-McClintock-Norton Amendment to the bill that appropriates money to the Justice Department passed on a 267-165 vote with 41 House Republicans supporting the measure.
Obviously, any bill that passes the Democratic-controlled House is going to need significant Republican support to pass the Republican-controlled Senate. The Senate version of the bill, S.1200, has 32 cosponsors including leading Republican Sens. Rand Paul (R-KY), Cory Gardner (R-CO), Lisa Murkowski (R-AK) and Kevin Cramer (R-ND). The Senate Banking Committee scheduled a hearing on July 23, 2019 titled “Challenges for Cannabis and Banking: Outside Perspectives,” indicating a willingness for Republicans to commence a Senate debate. If the Senate leadership schedules a vote, there is a great chance that this bill garners 60 votes overcoming any filibuster of the bill.
The bottom line is that the SAFE Banking Act makes sense and removes the block to legally-authorized state cannabis businesses to use financial instruments to conduct business.