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Why Senate Republicans are sitting out pot banking fight

WASHINGTON — The 2020 election prospects for a handful of Senate Republicans are emerging as a key factor in efforts to pass marijuana banking laws.

The GOP's disinterest in pending cannabis banking bills was on full display at a Senate Banking Committee hearing last month to discuss proposed reforms. Chairman Mike Crapo, R-Idaho, was the only Republican on the panel to attend.

Some observers say Republicans are reluctant to weigh in before 2020, worried about alienating voters who oppose pot legalization. Numerous incumbents hail from states that have been lukewarm to legalizing marijuana and in certain cases could face more conservative primary challengers.

"There are still some Republican senators who would prefer not to have to vote on this until after the primaries,” said a financial services lobbyist, who spoke on the condition of anonymity. The lobbyist added that Republicans’ absence from the hearing was “an indication that they don’t want anything to do with this.”

On the Banking Committee, Sen. Thom Tillis of North Carolina already has a primary challenger — retired businessman Garland Tucker — in a state that has yet to legalize pot beyond decriminalizing possession for small amounts and providing limited access to medical marijuana.

Five other Republicans on the committee hold seats that will be contested in 2020. Sens. Ben Sasse, R-Neb., and Mike Rounds, R-S.D., are up for re-election in states that have yet to legalize pot. Nebraska has decriminalized the first offense of possession of small amounts. South Dakota has no laws to open access.

Sen. David Perdue, R-Ga., is also defending his seat in a state with restricted access — just for products infused with low THC levels for limited medical use. Sen. Tom Cotton, R-Ark., is running in a state with a legal medical marijuana law, as is Sen. Martha McSally, R-Ariz.

Despite bankers’ support for legislative reforms making it easier for them to serve the legal cannabis industry, observers say it is still tough to get Republicans on board with legislation that could be viewed as supportive of marijuana legalization. The substance is still defined as a Schedule 1 narcotic at the federal level.

GOP incumbents are likely extra cautious due to their slim three-vote majority in the Senate.

“For most Republicans, they don’t view this as something with a lot of political upside,” said Ed Mills, a policy analyst at Raymond James.

Yet a silver lining could emerge after the primaries if incumbent candidates determine that support for marijuana businesses may play better to a wider audience.

Republican senators “are more likely to have broader acceptance” among constituents if they back marijuana banking legislation once they get to the general election, the financial services lobbyist said.

The banking industry has promoted legislative proposals to resolve inconsistencies between state and federal laws. Banks and other financial institutions with federal regulators have been hesitant to serve cannabis businesses even in states with full-fledged legalization, fearful that they could still be subject to federal enforcement.

The SAFE Banking Act would prohibit federal banking regulators from penalizing financial institutions for serving marijuana businesses that are compliant with state laws. Another bill, the STATES Act, would more broadly exempt businesses from the federal ban in states that have legalized the substance.

Industry representatives point out that banks are not promoting marijuana legalization, but that Congress needs a solution to allow financial services access for businesses in states that have already legalized pot.

“Our position on this is not around the legalization of marijuana,” said Peter Gwaltney, president and CEO of the North Carolina Bankers Association. “It’s around the ambiguity that the federal government and certain state governments have created.”

Banks headquartered in states without any legal marijuana laws may also support pot banking efforts.

“Even in a state like Idaho where we are very conservative and cannabis isn’t legal here, all of our community banks and all of our large banks have been affected by the fact that the states surrounding Idaho have cannabis legalization,” said Trent Wright, president and CEO of the Idaho Bankers Association.

Meanwhile, at least one GOP senator, Sen. Cory Gardner, R-Colo., has been one of the most vocal proponents of legislative efforts to help marijuana businesses. He is a lead co-sponsor of both the SAFE Banking Act and the STATES Act.

But Gardner’s support may be unique among Republicans, since he represents one of the first states to legalize marijuana. He is up for re-election in 2020 in a state that Hillary Clinton won in 2016.

“Few Republicans beside Cory Gardner would want a straight up or down vote on this,” Mills said.

A banking industry source, who spoke on the condition of anonymity, said that Crapo may have held the July hearing as a favor to Gardner.

“I think [Crapo] would like to avoid getting into this issue,” the source said. “This is not a winner in his state. I think he’s sympathetic to Cory Gardner and maybe the issue itself.”

The source added that Republicans like Crapo “are probably concerned whether they come off pro-legalization or not.”

The financial services lobbyist said Republicans facing challenges from within their own party are likely focused on pleasing voters most likely to show up in a primary. “Think about who the primary voters are. They are the most conservative voters of their states.”

Election watchers have homed in on Tillis' race where the incumbent first must fend off Tucker before qualifying for the general election. “The primary challenge that seems to be the most serious to me is the North Carolina one,” said Kyle Kondik, managing editor of Sabato's Crystal Ball at the University of Virginia's Center for Politics. That primary is scheduled for March 3.

Kondik added that McSally, who was appointed to fill former Sen. John McCain’s seat, “very well might have a challenger” too. McSally is expected run to finish the remaining two years of McCain's term.

So far, only one Senate Banking Committee Republican, Kevin Cramer of North Dakota, has signed on to both the STATES Act and the SAFE Banking Act.

Sens. Lisa Murkowski, R-Alaska, Dan Sullivan, R-Alaska, and Rand Paul, R-Ky., who do not sit on the Banking Committee, have also signed on to support the SAFE Banking Act.

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