One big sticking point remains as marijuana banking bill heads to committee

A key Senate committee is planning to consider a newly revised bipartisan bill on Wednesday to expand banking services for legal marijuana businesses with one major dispute standing in the way.

The new bill sponsored by Sens. Jeff Merkley (D-OR) and Steve Daines (R-MT) is a revamped version of the Secure and Fair Enforcement Banking Act, which is intended to give federally regulated banks and credit unions legal cover to take cannabis dispensaries and growers as customers.

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Currently, banks and credit unions still face federal prosecution and penalties if they provide services to such businesses because cannabis is still considered a Schedule 1 substance, which is defined as drugs with no currently accepted medical use and a high potential for abuse, according to the Drug Enforcement Administration. As a result of not having access to financial services, many state-legal cannabis businesses are forced to operate on a cash-only basis.

Some of the new features of the bill require federal banking regulators to “develop uniform guidance and examination procedures – including legacy cannabis-related deposits” and “update guidance related to hemp-related businesses and service providers.” It also discourages banks and credit unions from denying banking services based on “personal beliefs or political motivations,” although financial institutions are not required to offer services to cannabis businesses. Additionally, there are new protections for employees of “state-sanctioned cannabis businesses” attempting to obtain residential mortgages funded by federal programs. The bill also directs the Treasury’s Financial Crimes Enforcement Network to amend previous guidance on cannabis banking services within six months and for “depository institutions” to comply with the agency’s new regulations.

Daines emphasizes the bill does not make cannabis legal, but is intended to reduce the risk of crime and to protect access to financial institutions.

“Whether it’s a legal cannabis business, a legal gun manufacturer or a legal energy company, no Montana business should be shut out of banks or credit unions and forced to operate in all-cash because of ideological differences,” Daines said in a quote provided to the Washington Examiner. “I’m glad to work with my colleagues to ensure all legal Montana businesses will be protected from the whims of the Left’s wokeness.”

Senate Majority Leader Chuck Schumer (D-NY) vowed to bring the legislation to the floor as quickly as possible.

“This agreement allows cannabis businesses that have traditionally operated in cash to finally have the opportunity to accept credit and debit cards, allowing them to grow their businesses, pay their employees, protect their customers and ensure public safety,” Schumer said in a statement last week.

A key point of contention that remains is Section 10 of the bill, which imposes requirements if a regulator discourages a bank from entering into or maintaining a banking relationship with a customer or group of customers. In the new version of the bill, Section 10 now says regulators must have a “valid” reason for requesting or requiring the termination of bank accounts for any business. Some Republicans believe this provision will prevent future administrations from enacting programs similar to the Obama-era Operation Choke Point, which they believe have unfairly targeted businesses like gun retailers and payday lenders.

“The SAFER Banking Act prohibits federal bank regulators from ordering a bank or credit union to close an account based on reputation risk, which will protect energy companies and gun manufacturers from attacks from the left that threaten their business each day,” said Sen. Cynthia Lummis (R-WY), a co-sponsor of the bill. “All legal businesses should have access to bank accounts, and this legislation ensures the federal government cannot pick winners and losers when it comes to providing access to financial services.”

However, some critics believe the language in Section 10 is subjective and the provision that was designed to ensure regulators do not abuse their power isn’t enforceable.

“Even if there is a situation which a quote said in the bill could lead to a matter requiring attention or a matter requiring immediate attention, then it basically exempts them from what’s supposed to be protections for deposit accounts,” said Bryan Bashur with Americans for Tax Reform, a conservative advocacy group. “So, it really gives the agencies a lot of leeway to do what they want.”

Other senators have previously expressed issues with this provision. During a May hearing, Sen. Jack Reed (D-RI) expressed concerns with Section 10, claiming it would make it more difficult for regulators to warn banks about risky customers. He also said he believed the language was too broad and should be narrowed only to address cannabis.

Some lawmakers on the panel are already signaling they are concerned after Schumer released a statement last week vowing to advance the revised marijuana banking bill and ultimately use it as a vehicle to attach other legislation such as the Harnessing Opportunities by Pursuing Expungement Act and Gun Rights and Marijuana Act. The HOPE Act is designed to incentivize states and local governments to expunge cannabis records in their jurisdictions. The GRAM Act would allow medical cannabis patients to purchase and possess firearms, which is currently prohibited under a statute that’s been challenged in a number of federal courts over the past year.

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The markup, which is set for Wednesday, will be a major milestone for marijuana reform in Congress. Similar bills have been passed in prior sessions of Congress in the House, only to stall in the Senate. Senators on both sides of the aisle are projecting optimism the bill will get approved out of committee.

“Working through differences is part of the markup process and we will continue to do that,” said a senior aide familiar with discussions.