Industry to Crapo: Detach pot banking from public health debate

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WASHINGTON — Legislation that the House passed last year to enable banks and credit unions to serve the cannabis industry has a dim future in the Senate, but in a last-ditch effort bankers and other backers are urging lawmakers to set aside their doubts about marijuana legalization to focus solely on the banking component in the bill.

Senate Banking Committee Chairman Mike Crapo, R-Idaho, issued a memo in December casting a shadow on the Secure and Fair Enforcement Banking Act that passed the House in September. He expressed concern about public health and safety, the lack of research on the effects of marijuana, and money-laundering risks.

In response to Crapo inviting public feedback on how to address his concerns, banks and other supporters of the legislation said health and safety concerns about marijuana should be a separate issue from the immediate needs of cannabis businesses — in states where the substance is legal — to access financial services.

Among Crapo's concerns is the use of certain vaping products, which have prompted their own public health concerns, to smoke marijuana. He emphasized the need for federal agencies to conduct national studies on the potency of cannabis, how cannabis products affect minors and pregnant women, and the ties between marijuana and vaping.

Aaron Stetter, the executive vice president for policy and political operations at the Independent Community Bankers of America, said that, while those are real concerns, they would be better addressed outside of the Senate Banking Committee.

“We respect where Chairman Crapo was coming from on all of these fronts, but just respectfully ask and urge that that he focus on the banking aspects, and that we advance those banking aspects,” Stetter, whose group responded to Crapo with a letter, said in an interview.

Crapo's memo said the Secure and Fair Enforcement Banking Act, which enjoyed bipartisan House support, did not address his concerns. The bill would bar federal regulators from punishing depository institutions that serve the cannabis industry in states that have legalized marijuana.

“I remain firmly opposed to efforts to legalize marijuana on the federal level, and I am opposed to legalization in the State of Idaho,” Crapo said. “I also do not support the SAFE Banking Act that passed in the House of Representatives.”

But both bankers and cannabis industry groups say that some of Crapo’s concerns aren’t related to banking at all.

Financial institutions say they need federal certainty they will not be penalized for providing services to the growing cannabis sector, since marijuana is still considered a banned narcotic at the federal level. The large amounts of cash that marijuana businesses keep on hand is seen as a public safety issue.

Some argue that Crapo and other opponents of the bill should not draw a direct parallel between banking policy and drug enforcement questions.

The American Bankers Association also submitted a letter to Crapo in response to his memo, warning that making banks the “de facto regulator” of the marijuana industry would cancel out all of the positives of the SAFE Banking Act, because it would continue to discourage banks from working with cannabis businesses.

“Any attempt to regulate the state cannabis industry through its banking relationships sets a dangerous precedent for using access to banking services as a method to control the behavior and activity of an unrelated industry,” wrote James Ballentine, the ABA’s executive vice president of congressional relations and political affairs.

Crapo outlined particular qualms with the bill in an interview with American Banker in October after the Centers for Disease Control and Prevention issued warnings about vaping following a string of vaping-related deaths.

He said that the Banking Committee would need to consider the types of cannabis products that can be banked under the bill and suggested that products that involve vaping could be excluded.

But complicating the bill like that would make it even more difficult to pass, said Steven Kemmerling, founder and CEO of MRB Monitor, which specializes in identifying and managing marijuana-related risk.

"By adding public health and safety solutions as requirements necessary in order to loosen banking restrictions, Sen. Crapo is potentially creating significant barriers to getting this law passed and/or elongating how long it would take to implement,” he said.

Crapo could be worried that the passage of a bill like the SAFE Banking Act might be perceived as promoting marijuana use, which in turn could worsen a public health issue, said Dan Stipano, a partner at Buckley.

“Introducing vaping into the discussion greatly complicates things and makes passage of the bill less likely because of concerns about the serious health risks associated with it,” he said in an interview. “Getting a better understanding of the risks will take time.”

Although Crapo might be worried that his support for the bill could be construed as support for cannabis, proponents of the SAFE Banking Act have been trying to separate the issue of federal marijuana legalization from the issue of banking marijuana-related businesses.

“Let us be explicit: the SAFE Banking Act is not a referendum on federal legalization of cannabis,” more than 30 cannabis industry organizations said in a Jan. 16 letter to Crapo. “Support for federal legalization is not a prerequisite to supporting SAFE Banking.”

The four lead sponsors of the SAFE Banking Act in the House — Reps. Ed Perlmutter, D-Colo., Denny Heck, D-Wash., Steve Stivers, R-Ohio, and Warren Davidson, R-Ohio — also encouraged Crapo to take up the bill in a Jan. 21 letter. They said the legislation addresses some of Crapo's concerns by giving cannabis firms a safer way to manage their businesses.

“Our bill is about public safety,” they said. “It does not change the legal status of marijuana and is focused solely on taking cash off the streets and aligning federal banking laws with the decisions states are already making regarding cannabis.”

Stetter said he is even open to Crapo's introducing his own legislation to address cannabis banking, so long as he addresses it in some way, emphasizing “the critical importance” of confronting the issue as soon as possible to avoid any dangerous consequences.

“We also respect the chairman's prerogative to take up his own bill, but would urge him to do so, so that we can address the banking aspects of the bill, particularly as this issue … for some legal use, is becoming nearly ubiquitous,” Stetter said.

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Marijuana banking Marijuana industry Cannabis Community banking Law and regulation Mike Crapo Senate Banking Committee