Will Trump's AG Pick Just Say No to Pot Banking?
The fragile détente between the federal government, the cannabis industry and the banking sector is suddenly in jeopardy.
President-elect Donald Trump's nomination of Sen. Jeff Sessions for attorney general means that one of pot's fiercest opponents is poised to become the nation's top law enforcement official.
Sessions, an Alabama Republican, made headlines in April when he said, "good people don't smoke marijuana." He has also spoken admiringly about Nancy Reagan's '80s-era "Just Say No" message.
His selection Friday drew loud howls from the pot industry, which just last week was celebrating the passage of legalization ballot measures in eight states. Voters in California ratified the drug's recreational use, while Floridians approved medical marijuana.
"Jeff Sessions is a drug war dinosaur, which is the last thing the nation needs now," Ethan Nadelmann, executive director of the Drug Policy Alliance, said in a press release Friday.
Trump himself has taken a softer line on marijuana than his pick for attorney general has. He has called state-level legalization of recreational pot a "bad" experiment, but has also expressed support for providing medical marijuana to very sick patients.
"In terms of marijuana and legalization, I think that should be a state issue, state by state," Trump said last year.
The banking industry is generally agnostic on the question of whether marijuana should be legalized. And if there is ultimately a federal crackdown during the Trump administration, it seems unlikely that most bankers will shed any tears.
Throughout the Obama years, banking groups have consistently taken the position that it is dangerous for banks to do business with the fast-growing pot industry, since the laws of states that have legalized the drug are still in conflict with the federal ban.
That cautious view earned a large measure of vindication on Friday.
In comments from 2014 that now look prescient, Jenifer Waller, senior vice president at the Colorado Bankers Association, called the marijuana business a "serve-at-your-risk industry."
"Because any time there's a change in administrations, anytime there's a change in the law, you could be prosecuted," Waller said.
Most U.S. banks have heeded that warning. Fewer than 3% of all banks and credit unions attest that they serve the pot industry, according to government data from earlier this year.
Bankers' wariness has forced many marijuana businesses to deal entirely in cash, which they say is not only inconvenient, but also leaves them vulnerable to robberies.
Over the last few years, the Obama administration has been trying to ratchet down the conflict between federal and state laws.
A 2013 Justice Department memo laid out precautions that the state-sanctioned pot industry could take to reduce the chances of a federal raid. The following year, the Financial Crimes Enforcement Network used the Justice Department memo as the basis for guidance that gave banks a road map for how to reduce the risks involved with serving the cannabis industry.
But memos and guidance from the executive branch do not carry the force of law. They can easily be discarded by the incoming administration.
On the other hand, it seems possible that any crackdown by the federal government will spur a backlash on Capitol Hill. Members of Congress representing more than 60% of the U.S. population hail from states that have legalized cannabis.
Still, observers see Sessions' selection as an ominous sign for both the pot industry and for banks that want to serve it.
"The nomination is likely to have a chilling effect on the marijuana industry's access to banking," Steve Kemmerling, the chief executive at MRB Monitor, said in an email.