Reclassifying Marijuana is just one step needed to protect businesses
Last week, the Biden administration proposed new rules regarding the treatment of marijuana under federal law.
The proposed rules would reclassify marijuana from Schedule I to Schedule III, removing it from the list reserved for the most dangerous drugs — those with no accepted medical use and a high potential for abuse.
The reclassification is the latest step toward making marijuana a mainstream product.
However, even under the proposed reclassification, a massive flaw in federal law will continue to prohibit cannabis merchants from accessing banking services enjoyed by millions of other businesses across the country. As a result, cannabis-industry employees are less safe, innovative businesses are less financially secure, and regulators and law enforcement have less access to information needed to root out organized crime.
It’s been almost two decades since California legalized medical marijuana and 12 years since Washington and Colorado legalized recreational marijuana use. Among younger generations, cannabis products are now challenging alcohol as a common product used to unwind and enjoy after-hours entertainment. A survey conducted by cannabis research and data analyst firm New Frontier Data found that 69% of adults ages 18 to 24 prefer weed to alcohol.
Despite this growth, banks are prohibited from knowingly offering financial services to businesses that derive income from illegal activity — including cannabis sales that have been legalized at the state level but remain illegal at the federal level.
That means dispensaries and consumption lounges, as well as their suppliers, are forced to have large amounts of cash on hand and conduct all business transactions on site and in cash.
For criminals, dispensaries and consumption lounges might as well have neon signs reading “rob me.” Armed robberies, burglaries and smash-and-grab thefts have become a plague on these businesses. While the exact value of cash grabs from dispensaries and other cannabis businesses is unknown (another product of poor financial records), earlier this year, a single courier was robbed of approximately $436,000 in cash after he was ambushed and pepper sprayed.
In addition to stolen cash and increased violence, cannabis business owners face increased costs as they try to beef up security and protect their assets without being able to take tax write-offs for what would otherwise be normal business expenses.
As if all of that weren’t bad enough, the lack of financial records makes it more difficult for regulators and law enforcement to detect fraud, money laundering and other criminal activities that may involve a cannabis business.
In short, it’s a system that makes everyone less safe.
This is unacceptable, especially since a solution is readily available. Two bills currently moving through Congress, the SAFE Banking Act in the House and the SAFER Banking Act in the Senate, would allow state-legal cannabis businesses to access traditional financial services. Under the proposed laws, banking, insurance, mortgage lending and payment processing would all be legally allowed to provide financial services despite federal restrictions on cannabis.
By providing a “safe harbor” to financial services companies, the bills will help normalize financial transactions for a nearly $30 billion industry that is legal in 38 states. It would also promote transparent business practices and good relationships between the cannabis industry, regulators and banks, the latter of which are specifically empowered by the laws to decline services to cannabis businesses as they see fit.
Sen. Jacky Rosen, D-Nev., was an original co-sponsor of the Senate SAFER Banking Act when it was introduced last year. She has since been joined as a co-sponsor by Nevada’s entire federal legislative delegation — Democrat and Republican alike.
“Legal cannabis businesses in Nevada have created thousands of jobs and brought in millions of dollars in revenue to our state,” Rosen said in a statement. “However, these businesses are frequently targets for crime due to outdated federal laws that prevent access to banking services. I’m working across the aisle to help Nevada’s legal cannabis businesses access much-needed banking and financial services, supporting small businesses and keeping our communities safer in the process.”
The bills have also found support from the banking industry.
In a statement released following Biden’s announcement that marijuana would be reclassified, the American Bankers Association said, “It’s important for policymakers to know that any potential decision to reclassify cannabis has no bearing on the legal issues around banking it. Cannabis would still be largely illegal under federal law, and that is a line many banks in this country will not cross. The solution is the bipartisan SAFER Banking Act. … Passing that legislation in Congress would address the ongoing legal limbo around cannabis banking, while enhancing public safety, tax collection and transparency.”
The economy of vacation and nightlife destinations like Las Vegas must constantly evolve to meet the needs of consumers. While cannabis entrepreneurs in Southern Nevada have shown themselves to be up to the challenge, they are stuck in legal limbo, endangering employees, customers, couriers and business owners alike.
Passing the SAFER Banking Act and its companion in the U.S. House is not only necessary for aligning federal law with the will of the majority of the American people but is also essential to making our communities safer and supporting the small businesses that form the backbone of the American economy. Congress should pass both bills as soon as possible.
