WASHINGTON — Support from members of the ruling congressional party, a Democrat as prominent as Sen. Elizabeth Warren, and a Republican president might normally seem like enough to spur legislative progress.
But despite backing from all three camps, plenty of pessimism still clouds the latest effort to enable the legal marijuana industry's access to the banking system.
Perhaps the biggest factor helping along the bill authored by Warren and Sen. Cory Gardner, R-Colo., exempting businesses from a federal pot ban in states where the substance is legal, was President Trump's casual comment Friday that he "probably will end up supporting" the legislation.
Yet bipartisan support may not be enough to avert opposition from many conservative Republicans, particularly in the House, to any pot legalization, and the GOP leadership is more focused on other issues. Some industry representatives also caution that the Gardner-Warren bill, if enacted, could leave some banks still unsure about serving the cannabis industry.
“If adopted, we think it will make it acceptable to bank marijuana, but the fact that it doesn’t have that [banking] specificity in it just leaves a little question in our minds,” said Don Childears, president and chief executive of the Colorado Bankers Association.
President Trump's comment that he would sign the bipartisan bill cosponsored by one of his harshest critics, in Warren, seemed to give the legislation traction. But it was unclear how strongly the administration would try to advance the bill.
"An off-the-cuff remark before meeting with G-7 allies ... does not constitute unwavering support," Habib Bentaleb, an attorney at Harris Bricken, wrote on the Canna Law Blog. But he added that Trump's support, if sincere, could be beneficial.
"We’ll have to see more consistent and direct support from the President before we can feel confident that the STATES Act will become law. The President’s support is necessary because he’s still very popular with the Republican base and can therefore give recalcitrant Republicans in Congress cover if they’ve been cannabis opponents previously."
The president's remark seemed inconsistent with the positions taken by his attorney general, Jeff Sessions, and Congress still has powerful anti-legalization voices such as Rep. Pete Sessions, R-Texas. (The two are not related.)
Analysts also speculated that the bill, the Strengthening the Tenth Amendment Through Entrusting States — or STATES — Act likely won’t move at least until the next congressional term because of other GOP leadership priorities.
“My pessimism comes from [Senate Majority Leader Mitch] McConnell’s laser focus on confirming judges, so there just isn’t floor time there,” said Isaac Boltansky, an analyst at Compass Point Research & Trading.
The STATES Act is less banking-specific than similar bills proposed by Rep. Ed Perlmutter, D-Colo., and Sen. Jeff Merkley, D-Ore., that have garnered industry support. Those bills would prohibit federal banking regulators from terminating or limiting deposit insurance to legitimate marijuana-related businesses or discouraging depository institutions from offering financial services to an account holder solely because of affiliation with such businesses.
“I think that they are going to be able to move it at least through committee, I don’t know how much further it will get,” Childears said of the STATES Act.
Yet it is unclear how fully the industry at large supports the Gardner-Warren bill. On Monday, the American Bankers Association issued a statement through a spokesman indicating support for legislation to clarify pot banking policy, but the ABA stopped short of endorsing any specific proposal.
“ABA believes the time has come for Congress and the regulatory agencies to provide greater legal clarity to banks operating in states where marijuana has been legalized for medical or adult use," the group said. "Those banks, including institutions that have no interest in directly banking marijuana-related businesses, face rising legal and regulatory risks, and ever increasing ambiguity and uncertainty, as the marijuana industry grows.
“ABA welcomes recent proposals in both the Senate and the House that seek to provide greater clarity and bridge the gap between state and federal laws. We look forward to working with policymakers of both parties on proposals that provide the legal and regulatory certainty banks need to best serve their communities.”
While Republicans may be hesitant to vote for legislation that moves the needle toward legalizing marijuana, the bill so far has three Republican Senate co-sponsors: Rand Paul, R-Ky., Lisa Murkowski, R-Alaska., and Dan Sullivan, R-Alaska.
Banks are often cautious to provide services to cannabis-related businesses due to potential legal ramifications and conflicts between federal and state laws, including the Bank Secrecy Act and anti-money-laundering rules. Under AML requirements, banking transactions involving cannabis businesses often obligate the financial institution to file Suspicious Activity Reports.
“It’s an enormous, complex issue and that is the compliance with BSA/AML,” Childears said. “The key focal point there is SARs.”
While he said the Gardner-Warren bill isn’t exactly clear on whether SAR filing requirements would be reduced due to its broader approach to marijuana as a whole, he said he thinks the legislation would reduce the risk for banks to do business with legally operating cannabis businesses.
“It would reduce the risk to the institution,” Childears said. “We have a few banks that have chosen to take the risk now and bank marijuana.”
Without access to banking, legal cannabis-related businesses in certain states generally have to operate in only cash, which makes it harder for regulators to monitor the industry.
Dan Crowley, a partner at K&L Gates, is optimistic the bill could be enacted or included in an appropriations measure or some other must-pass legislation at the end of the year.
“You can’t regulate business conduct if it doesn’t have access to the banking system,” Crowley said. “I think this is a candidate for enactment before the end of the year. If this one can get bipartisan support in both chambers I would consider it a candidate for inclusion.”
Crowley said Republicans could end up supporting the bill if they see similarities between banks trying to cater to the legal pot industry and the frustration with Operation Choke Point, an Obama administration initiative to crack down on fraud that drew criticism because of its impact on legal industries.
He said the fact that the bill amends the underlying Controlled Substances Act allows banks relief from filing SARs for transactions associated with cannabis businesses.
“If you’ve got businesses that are legal under state law and they are duly reporting their receipts and deposits, there isn’t any suspicious activity any more than there is in your neighborhood barber shop,” Crowley said.