WASHINGTON — Bills to provide explicit regulatory protections for banking legal pot business so far have failed to gain traction, and now recent attempts to clarify marijuana banking rules through the congressional appropriations process have also fallen flat.

The Senate Appropriations Committee recently tabled a measure — by a vote of 21-10 — to ban regulators' use of federal funds to punish banks for working with legal pot businesses. House members defeated a similar appropriations measure earlier this month.

The spending measures have drawn opposition from even fans of legal pot banking, who say the budget bills are not the appropriate vehicle to address the issue.

Sen. Jeff Merkley, D-Ore., and Sen. Elizabeth Warren, D-Mass.
Sens. Jeff Merkley, D-Ore., and Elizabeth Warren, D-Mass., have both proposed separate bills to make it easier for banks to cater to legal marijuana businesses. Bloomberg News

“Do I think these businesses ought to be able to bank? Absolutely I think they need to be able to bank. But this amendment does not get them to that point," said Sen. Jon Tester, D-Mont., during the Senate committee markup last week.

Both amendments to broader spending bills were based in part on legislation by Sen. Jeff Merkley, D-Ore., and Rep. Ed Perlmutter, D-Colo., that would bar federal regulators from discouraging banks from offering financial services to an account holder that was a legitimate marijuana businesses.

But those bills have not garnered enough support from either banking committee. Meanwhile, the Senate appropriations amendment would affect the Treasury Department budget for only one year, and cut funding for regulators who pot banking advocates say should write rules to establish clearer policy.

"This deals with the Department of Treasury for one year, that’s it,” Tester said.

Perhaps the toughest roadblock to passing the appropriations measures is an effort to keep controversial riders from appropriations bills and move the spending process forward.

“The biggest thing that they’re doing right now on appropriations bills ... is that they have an agreement on not having policy riders,” said Ed Mills, a policy analyst at Raymond James. “They don’t want any poison pills on either ... the Democrat or Republican side.”

Yet both banking and legal cannabis industry advocates say the latest legislative setbacks are not the end of efforts to remove federal barriers between banks and the burgeoning pot sector.

"This issue is not going to go away, and, in fact, it is only going to grow and become more complicated the longer it is not dealt with," said Camden Fine, president and CEO of Calvert Advisors LLC and the former head of the Independent Community Bankers of America.

But Republicans and Democrats argued that the amendment attached to the Senate spending bill, which was offered by Merkley, would only make things more confusing for banks and pot businesses across the country.

The appropriations process "in the House or Senate could deal with the issue with appropriate amendments, but likely they will not," Fine said. "Therefore, major committees of jurisdiction such as the Banking Committee or the Judiciary Committee would be the more fitting committees to deal with the marijuana banking issue. But it needs to be dealt with sooner than later."

Because the amendment would have been attached to a spending measure, it would have restricted the Treasury Department’s Financial Crimes Enforcement Network from using funds to penalize banks for working with legal marijuana companies.

“So now you’ve got the regulator enforcer with no funding to enforce the law, but the law still exists,” said Sen. James Lankford, R-Okla. “And that makes it even more challenging for them.”

“This is an issue that really needs to be resolved in the [Senate] Banking Committee,” Lankford added.

Despite moves by several states to legalize medicinal and recreational marijuana use, the federal ban has posed a continual challenge for pot businesses to find banks willing to work with them. Some businesses have resorted to dealing only in cash.

“Cash, and we’re now talking billions of dollars, is basically a big problem. Because it’s great for organized crime, it’s great for money laundering,” Merkley said at the appropriations markup last week.

The legislative discussion has gained steam after Sens. Cory Gardner, R-Colo., and Elizabeth Warren, D-Mass., introduced a less banking-specific measure called the STATES Act that would exempt marijuana businesses in states where it is legal from the federal pot ban.

The Merkley-Perlmutter and Gardner-Warren bills "represent comprehensive cannabis policy reform in the U.S. … allowing states to determine their own policies and that’s the type of policy reform that we need to see happen,” said Morgan Fox, director of media relations at the National Cannabis Industry Association. “Most people are going to be focusing more on comprehensive legislation that would be authorizing legislation” rather than appropriations, Fox added.

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