Is a hearing on pot banking as far as GOP will go?
WASHINGTON — Despite Senate Banking Committee Mike Crapo's willingness to hold a marijuana banking hearing, Republican support for a cannabis banking bill is still in question.
That Crapo agreed to hold the proceeding Tuesday was its own victory for the financial and cannabis sectors, but he gave no indication of supporting either of the two bills currently being discussed, including the SAFE Banking Act. And no other Republican on the panel expressed a view one way or another.
Crapo, hailing from one of three states that prohibits marijuana in all forms, in his opening statement noted "concerns over advocates pushing to legalize marijuana, the effects of the SAFE Banking Act in light of marijuana continuing to be illegal under federal law, and health harms and addictions that marijuana can lead to."
Analysts say that legislation to ease pot banking efforts is still possible, but that Tuesday's hearing offered little clarity.
"This felt like a check-the-box exercise in which Sen. Crapo agreed to a hearing because there was industry pressure for it," Jaret Seiberg, a policy analyst at Cowen Washington Research Group, said in a note. "Now that he has held the hearing, we do not have a sense that he is motivated to do more."
The bill — known in longhand as the Secure and Fair Enforcement Banking Act — would prohibit federal banking regulators from penalizing an institution that accepts insured deposits from state-approved cannabis businesses. It passed the House Financial Services Committee in March by a 45-15 vote.
Another bill, known as the STATES Act, would enable businesses more broadly to skirt the federal ban on marijuana if they are compliant with state laws and regulations.
Democrats on the Senate committee were largely supportive of a solution to ensure that businesses can access the banking system without facing the risks of operating in cash.
“Banks and credit unions play a key role in monitoring our financial system for fraud, money laundering, and other illegal activities,” said Sen. Sherrod Brown of Ohio, the panel's top Democrat. “It’s critical that we maintain our robust anti-money-laundering framework. And access to the banking system is essential to keeping our communities safe and ensuring full participation in the economy. We can’t continue to ignore this industry and the thousands of workers and communities it affects.”
But Seiberg noted the absence of key voices from both parties at the hearing.
"Attendance at the hearing was not great. Not only were many Republican senators not present, but Sen. Elizabeth Warren on the Democratic side was not there," Seiberg said. "This matters because one really needs to see broad GOP support on the committee for action."
The hearing featured testimony from various stakeholders supporting broad efforts to make it easier for banks to serve legal marijuana businesses.
Sen. Cory Gardner, R-Colo., who is not a member of the Senate Banking Committee but is a sponsor of both bills, said the status quo is not working.
“What makes the current situation intolerable and untenable is the disconnect between federal and state law,” Gardner, a witness at the hearing, said in his prepared remarks. “For instance, every single state-legal cannabis transaction in Colorado is federally illegal. … Banks will not accept industry money for fear of regulatory action or federal forfeiture. Keeping those dollars out of banks means we lose the ability to trace where the dollars go.”
Financial services industry representatives highlighted the public safety and research benefits to removing federal barriers on the marijuana industry and giving it access to financial services.
“I have had numerous law enforcement officers comment that us banking this industry is providing data that they would not otherwise get if the industry were unbanked,” said Rachel Pross, chief risk officer at Maps Credit Union, which currently serves marijuana businesses in Oregon.
Joanne Sherwood, president and CEO of Citywide Banks in Colorado, said institutions in Colorado are not able to conduct research about the benefits and risks of marijuana in general, due to the federal ban.
“We do have Colorado universities who would really benefit from researching this industry and the effects of it,” Sherwood said. “Because they are taking federal grants and federal subsidies, they are unable to go forward on those programs.”
She also said that despite recreational marijuana legalization in Colorado, her bank isn’t willing to take the risks of serving cannabis businesses.
“The fundamental issue is this is illegal from a federal perspective. … We are not willing to take the reputational risk,” Sherwood said.
Sen. Tina Smith, D-Minn., said protecting banks from legal penalties is not enough, and that lawmakers should consider decriminalizing marijuana at the federal level.
"As we’re looking at criminal penalties for involvement of businesses with marijuana, we can’t forget the thousands of individuals who have spent time behind bars for their involvement with marijuana,” she said.
One Republican member of the Senate Banking Committee, Sen. Kevin Cramer of North Dakota, has indicated his support for the STATES Act. Yet neither he nor any other GOP member of the panel besides Crapo came to the hearing.
Still, supporters and some analysts say legislative hopes are still alive.
Isaac Boltansky, director of policy research at Compass Point Research & Trading, said in a note Tuesday that there are other legislative outlets for the SAFE Banking Act to move forward, despite limited Republican interest.
"While there is GOP opposition to this effort for a number of reasons, we believe there could ultimately be a compromise that folds the cannabis banking fix and" other financial services measures "into a broader legislative vehicle," Boltansky said.
Gardner told reporters that he is actively pushing Senate Majority Leader Mitch McConnell, R-Ky., and Crapo to support pot banking legislation, though he would not say whether he has a commitment for a committee or full Senate floor vote.
“If we had the STATES Act or the SAFE Act on the floor of the Senate today it would pass, with majority support,” Gardner said. “And I think it would have the majority of Republicans voting for it as well. I think that this has a lot of support on both sides of the aisle.”
After the hearing, Crapo told reporters that the committee will continue to look into the marijuana banking issue, but he would not say if he would hold a vote. He also said he does not plan to hold a hearing for regulators to weigh in on the issue.
“I don’t intend to do that,” Crapo said. “At this point, we’ve got a lot of interest and information coming into us not just from these witnesses but from stakeholders throughout the entire range of the set of issues and we are going to work to see if we can find the answers to this question.”