Pot banking reform gets a boost from Barr endorsement

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WASHINGTON — As two bills intended to help marijuana banking efforts wind through Congress, one gained a notable supporter this week: Attorney General William Barr.

Barr told a Senate Appropriations subcommittee that a proposal by Sens. Cory Gardner, R-Colo., and Elizabeth Warren, D-Mass., which would exempt states where pot is legal from the federal ban on the substance, is better than the current system where state and federal laws are in conflict.

The Strengthening the Tenth Amendment Through Entrusting States Act would amend the Controlled Substances Act to allow businesses to skirt the federal ban in states that have passed ballot measures or taken other steps to legalize marijuana. Such an exemption would likely make banks more comfortable working with the cannabis industry.

“Now I haven’t studied specifically the STATES law, but I’ve just circulated it through the Department for comment and I think that’s the process it’s in now,” Barr said at the hearing Wednesday. “Once we get those comments we’ll be able to work with you on any concerns about the STATES law, but I would much rather that approach, with the approach taken by the STATES Act, than where we currently are.”

Barr said his ideal choice is one uniform regime dealing with marijuana enforcement at both the state and federal level. But he said the current situation, in which the federal ban on pot conflicts with decisions by a number of states to legalize the substance for medical or recreational purposes, poses problems.

“The situation that I think is intolerable, in which I’m opposed to, is the current situation we’re in, and I would prefer one of two approaches rather than where we are,” Barr told Sen. Lisa Murkowski, R-Alaska, a supporter of the bill. “Personally, I would still favor one uniform federal rule against marijuana, but if there is not sufficient consensus to obtain that, then I think the way to go is to permit a more federal approach that states can make their own decisions within the framework of the federal law and so we’re not just ignoring the enforcement of federal law.”

The banking industry has supported efforts to enable financial institutions to serve legal marijuana businesses that are in compliance with state laws and regulations. But the industry has only recently endorsed the STATES Act.

Another bill, the Secure and Fair Enforcement Banking Act, or SAFE Banking Act, passed the House Financial Services Committee in March. Bankers preferred that legislation because it was specific to the industry, making it illegal for a federal regulator to penalize a financial institution that accepts insured deposits from state-approved cannabis businesses.

The committee passed the bill in a 45-15 vote, with 11 Republicans joining all the panel’s Democrats. But the Republicans who opposed the legislation harped on concerns that it didn’t address the fact that marijuana is still illegal at the federal level.

Rob Nichols, the president and CEO of the American Bankers Association, said last week that the STATES Act would allow banks to serve legal marijuana businesses, despite the fact that it is not specific to the industry.

"While ABA does not take a position on the legalization of cannabis and the STATES Act is not a banking specific bill, removing the federal prohibition on cannabis in states that have legalized its use would allow banks to accept deposits and provide basic financial services to state licensed cannabis businesses and their service providers," Nichols said in a letter to Gardner and Warren.

While legislation to enable banks to serve marijuana businesses faces an uphill battle in the Senate due to opposition from Republican leaders, analysts are optimistic that it will pass this Congress if it is attached to a larger legislative vehicle, including an appropriations bill.

“We firmly believe that the cannabis banking fix will become law during this Congress if the debate remains squarely focused on safety and states’ rights,” wrote Isaac Boltansky, director of policy research at Compass Point Research & Trading, in a recent note. “While there is GOP opposition to this effort for a number of reasons, our sense is that there could ultimately be a compromise that folds both the cannabis banking fix and [Bank Secrecy Act] modernization measures into a broader legislative vehicle.”

President Trump has signaled he would likely sign the STATES Act into law if Congress passes it, and Barr’s comments are a shift from the stance of former Attorney General Jeff Sessions.

Sessions broke from an Obama administration policy in which the Justice Department wouldn’t enforce the federal ban on marijuana in states that legalized it. But at his nomination hearing in January, Barr signaled he would uphold the Obama-era guidance.

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Marijuana banking Finance, investment and tax-related legislation State regulators DoJ American Bankers Association
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