Legal cannabis needs banking services now

A couple of years ago I was in Boston and decided to take a trip to a cannabis dispensary. Nothing about it was convenient — I had to take the T to Brookline, and once I was there I had to wait outside in line for about an hour before I could come inside. Ironically — or perhaps tellingly — the store was a repurposed 19th century bank building, but instead of tellers behind the glass it was people you could buy weed from. But the whole thing was done in cash.

Don't worry, you're not in for a Maureen Dowd-esque tale about the horrors of not reading the dosing instructions on edibles. Honestly the whole experience was a somewhat whimsical mix of the novel and the mundane — marijuana in a package from a store, neat! And whatever novelty I might have derived from the experience wore off a long time ago; Maine, Connecticut, Rhode Island, New York, New Jersey, Vermont, Virginia and the District of Columbia have all joined Massachusetts in legalizing recreational cannabis on the East Coast, and only 13 states have neither medicinal nor recreational cannabis laws on the books.

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In other words, cannabis is increasingly more legal than not, and as such represents a $13.2 billion market that is only poised to grow. But because cannabis remains a Schedule 1 controlled substance at the federal level, banks and credit card companies run considerable compliance risk if they do business with legal cannabis firms. That means those businesses have to either deal in enormous volumes of cash — a huge risk for the companies, and another compliance headache for banks — or turn to various payment intermediaries to facilitate electronic payments.

Fortunately there is a bill in Congress right now that would solve this problem, and you've read about it in these pages before. The Secure and Fair Enforcement Act, or SAFE Banking Act, has been floating around Congress for almost a decade and has been passed by the House with wide bipartisan support over and over again. The measure was included in the House version of the National Defense Authorization Act — Congress' annual must-pass defense spending bill — but as of yet remains unincluded in the Senate version of the bill. 

Why hasn't Congress passed a popular bill that solves a discrete and serious problem? Great question. Some Senators just don't like it and won't pass it out of committee; others think it's good but doesn't go far enough, but a bill that does go far enough doesn't have the votes. But the specific logjam in the Senate is representative, I think, of a broader indecisiveness in society about how we want to treat cannabis in general. 

Growing pains: A tale of two New England cannabis bankers

Vermont State Employees Credit Union is attracting new cannabis clients so rapidly that it had to press the pause button to add staff. Another New England lender, Needham Bank, is building its own pot banking business through acquisition.

Cannabis is a plant, and was documented and used in Asia and the Middle East for thousands of years before it was introduced to Western medicine by William Brooke O'Shaughnessy in the 1840s. The criminalization of cannabis in the United States, however, is much more recent and the consequences have been much more severe. The passage of the Controlled Substances Act in 1970 not only criminalized cannabis possession and sale, but also stigmatized cannabis as a dangerous drug that, even if innocuous in itself, can lead users to seek out ever-greater highs. And there is a legitimate debate to be had — and additional research to be done — on the links between cannabis use and psychiatric disorders and overdoses of highly-concentrated cannabis products. Perhaps there is a concern that legalizing cannabis at the federal level could lead to unintended consequences.

But if that is the concern, let's also consider the unintended consequences of having cannabis effectively legalized at the state level but not at the federal level. Regardless of whether you think cannabis should be legal, it already is in many states — the genie is out of the bottle. Denying these otherwise legal and tax-paying businesses access to the financial system serves no discernable policy objective — at this point, it's lazy at best and negligent at worst. 

President Biden's announcement earlier this month that he would pardon all federal cannabis possession convictions and orders to the Department of Justice and Department of Health and Human Services to explore rescheduling cannabis suggests that the administration is already moving in the direction of legalization. But that effort could take months or years, and at any rate isn't incompatible with the narrower objectives of the SAFE Act. 

So get off the bong and pass the bill, Congress. It is the least you can do, besides the nothing that you've already tried.