By Ciara Linnane, MarketWatch
The push for legislation that would allow banks to do business with cannabis companies without the risk of federal enforcement action is gaining momentum, and credit unions are playing a key role.
The National Association of State Treasurers adopted a resolution on Friday that calls for “common-sense federal laws and regulations” for companies in states that have legalized cannabis for medical or recreational use that are forced to deal with large amounts of cash.
“Cash-based systems are inefficient, expensive and opaque, making illicit activity more difficult to track and posing a significant risk to public safety by increasing the likelihood of violent crime,” the association said in its resolution.
Because cannabis remains a Schedule I drug at the federal level, a classification that groups it with heroin, federally insured banks are unable to do business with companies for fear of being shut down, a situation that experts agree is hampering the development of the sector.
As Canadian companies enjoy their first-mover status in the only G-7 country to fully legalize cannabis, U.S. companies have been unable to open bank accounts or tap capital markets to raise the funds needed to grow their businesses, and many have been forced to hire security companies, such as Brink’s Co. /zigman2/quotes/203540504/composite BCO -0.51% , to guard cash piles.
‘We wouldn’t tolerate [half of all businesses being burglary victims] in any other industry, and we shouldn’t tolerate it here.’
Ryan Donovan, Credit Union National Association
Ryan Donovan, chief advocacy officer for the Credit Union National Association (CUNA), said one out of every two cannabis businesses has been robbed. “We wouldn’t tolerate that in any other industry, and we shouldn’t tolerate it here,” he told MarketWatch.
Credit unions have a core mission of serving the communities they operate in, and are keen to help the fledgling cannabis sector grow and thrive, but they, too, need a safe harbor or state exemption to fully participate, he said. CUNA has no official position on cannabis itself, but it would like to see one of two measures currently under consideration be adopted, said Donovan.
The Secure and Fair Enforcement (SAFE) Banking Act is a bipartisan bill introduced in March that would protect banks and their employees from liability for federal prosecution when servicing cannabis companies. The bill is sponsored by Colorado Democratic Rep. Ed Perlmutter, Washington Democratic Rep. Denny Heck and two Ohio Republicans, Steve Stivers and Warren Davidson, and is supported by the banking sector, the National Association of Attorneys General and Treasury Secretary Steven Mnuchin, among others.
Separately, lawmakers are promoting the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act, which gives each state the right to determine its own approach to cannabis legislation. That bill is backed by Elizabeth Warren and Cory Gardner, both Senate Democrats and presidential hopefuls, and Attorney General William Barr has said it is his preferred solution.