“We recognize banking access is only one part of the problem facing minority cannabis businesses today. But let’s start somewhere and get done now what we can.”
By Frederika McClary Easley, The People’s Ecosystem
In February, the U.S. House of Representatives for a sixth time passed the Secure and Fair Enforcement (SAFE) Banking Act—this time attached to the America COMPETES Act, the comprehensive package aimed at enhancing U.S. leadership in science, innovation and competitiveness.
The purpose of the legislation is to protect banks from money laundering charges for providing loans and other financial services to state-legal cannabis businesses. Many argue that the passing of the SAFE Banking Act is a matter of health and safety due to the large amounts of cash that businesses are forced to have on hand and the lack of access to traditional loans.
Senate Majority Leader Chuck Schumer (D-NY) and Sens. Cory Booker (D-NJ) and Ron Wyden (D-OR)—who are working to introduce the Cannabis Administration Opportunity Act (CAOA)—have expressed the need for a comprehensive approach. And Sen. Sherrod Brown (D-OH), who chairs the Senate Banking Committee, has shared his preference to have the SAFE Banking Act paired with drug sentencing reform.
The People’s Ecosystem, a 70 percent BIPOC-, women- and LGBTQ-owned and led business that successfully transitioned from the legacy to the regulated industry, has experienced firsthand the danger and inconvenience, and has been subject to predatory practices with financial institutions.
Our dispensary was physically damaged by a vehicle intentionally being driven into it during a robbery attempt. We have had to deal with up to 40 percent interest rates for loans and have had accounts closed more times than we can count. Harm is being repurposed and specifically disparately impacting social equity entrepreneurs. Not addressing this issue and instead choosing to play political games is perpetuating barriers to capital and economic services. That’s why The People’s Ecosystem is in support of the SAFE Banking Act.
We recognize there are still major disparities in our banking system felt by Black, Latinx and indigenous patrons. Data shows that Black-owned businesses are twice as likely to be denied financing, and if loans are approved, they are also more likely not to receive the full amount for which they applied.
Black, Latinx and indigenous individuals and communities that have historically been discriminated against in the banking system need protection from biased decision-making individuals and structures, guidance with navigating the lending process and preparation in order to receive sought-after outcomes. Accountability measures must be married with timelines and a scope that ensures that the intended people and communities which are owed harm repair are the actual recipients of funds and other financial allowances.
The SAFE Banking Act acknowledges the existence of inequality through its language mandating diversity and inclusion reports and a study to be conducted by the Government Accountability Office. While those measures do not go far enough to address the issue, it is a step in the direction toward righting the wrongs of the past.
We appreciate Sen. Brown’s position that the SAFE Banking Act bill needs to be inclusive of sentencing reform and we look forward to working with Sens. Schumer, Booker and Wyden on their comprehensive bill; however, we need immediate relief.
There are BIPOC business owners right now who are paying exorbitant interest rates on loans for standard operating needs or legal business owners who cannot open a bank account—even for non-plant touching operations. Sixty votes are needed in the Senate for CAOA or any other sort of cannabis reform legislation. The votes don’t appear to be there to pass a broader bill, but we can’t let perfect be the enemy of the good.
We recognize banking access is only one part of the problem facing minority cannabis businesses today. But let’s start somewhere and get done now what we can. We need access to the banking system now as we continue the fight for social equity and sentencing provisions, broader banking service for all minority businesses and greater education and accountability measures.
Quite simply, SAFE Banking is social equity! Banking access is a huge step forward on federal cannabis reform that will catapult our country into a much-needed conversation around cannabis reform and kickstart broader, more comprehensive reforms.
To Sens. Schumer, Booker, Wyden and Brown: to continue to block the SAFE Banking Act is to be against social equity and thousands of state-legal businesses in your states and across the country that desperately need help. Please pass SAFE Banking as soon as possible.
Frederika McClary Easley is the Director of Strategic Initiatives at The People’s Ecosystem and host of The People are Blunt podcast.
Justice Department Tells Supreme Court To Reject Marijuana Case, While Acknowledging Legalization Momentum
The Justice Department is telling the U.S. Supreme Court that it should not take up a case concerning workers’ compensation for medical marijuana that could have wide-ranging implications related to federal supremacy. And part of its reasoning is that Congress appears to be moving toward a solution on its own, as lawmakers work to end federal prohibition.
The question before the court arose out of a pair of Minnesota cases where workers had sought compensation for medical cannabis from their employers after being injured on the job. In both instances, the state Supreme Court ruled that federal law prohibiting marijuana preempted state law, meaning the employers were not obligated to pay for the medicine.
But the plaintiffs and advocacy groups like Empire State NORML are making the case that, because employers aren’t required to possess, manufacture or distribute cannabis in contravention of federal law, simply providing workers compensation for marijuana is not preempted by the Controlled Substances Act (CSA).
The U.S. Supreme Court then became involved after the parties appealed, and justices notably sought input from the top Justice Department lawyer. The solicitor general’s office filed its amicus curiae response on Monday, recommending that the court not take up the case and also saying the matter would be more appropriately addressed by the executive or legislative branches.
“The petitions in these cases, which present a novel question in a rapidly evolving area of law, do not warrant this Court’s review,” DOJ said, adding that “when a federal law such as the CSA prohibits possession of a particular item, it preempts a state law requiring a private party to subsidize the purchase of that item.”
“The decisions below, however, rest on a more complex rationale that unnecessarily explores the scope of federal aiding-and-abetting liability outside the context of any federal prosecution,” it continued.
The filing does acknowledge that several other state courts have weighed in on the issue, with differing opinions. But it said that none of those cases have “meaningfully considered all of the possible grounds for preemption,” so “no further review is warranted at this time.”
“Petitioners intentionally possessed marijuana, which is a crime under federal law even if permitted under state law,” the Justice Department said.
In one case, Susan Musta filed a petition with the U.S. Supreme Court in November after her state’s highest court determined that the CSA did, indeed, mean her employer did not need to provide reimbursement for medical cannabis after she was injured at her place of work, a dental center.
The state Supreme Court made the same judgement in another case where a man named Daniel Bierbach was injured at his job working for an all-terrain vehicle company and sought compensation for medical marijuana. Bierbach submitted his petition for a writ of certiorari months after Musta.
From the Justice Department’s perspective, a “state-law order that compels third parties to directly subsidize petitioners’ possession of marijuana on a medical-use rationale” would amount to overriding legislative intent consistent with the CSA, it said.
“If States could enforce laws compelling third parties to subsidize federal crimes, they could directly undermine congressional determinations. For example, no legal principle would preclude a State from requiring private employers to reimburse the use of other federally prohibited products or substances, such as LSD and other psychedelic drugs, based on perceived benefits. The conflict with the CSA remains, however, when Minnesota law compels private employers to subsidize the same federal crimes.”
The filing briefly references cases outside of Minnesota where this issue has been raised and courts have landed on different determinations.
When a case arose in the Maine Supreme Court, the body took a similar approach to Minnesota’s. Meanwhile, the high courts of both New Hampshire and New Jersey have ruled that reimbursements to medical marijuana patients can go forward regardless of federal prohibition.
Even so, DOJ said that the “disagreement does not warrant this Court’s review.”
“The disagreement is limited and recent, with three of the four decisions coming in 2021,” it said. “And it is unclear how many additional States interpret their state workers’ compensation schemes, standing alone, to require such reimbursements, or what the limits of such a state-law reimbursement obligation might be.”
It added that “no state court of last resort has issued a decision that provides an appropriate backdrop for this Court’s review of the obstacle-preemption issues that are inherent here” and “this Court would benefit from further development of the relevant preemption questions in the lower courts before potentially addressing them itself.”
One of the more interesting elements of the Justice Department’s amicus curiae is that the response seems to acknowledge the seeming inevitability that this matter will be resolved legislatively as Congress continues to consider proposal to federally legalize marijuana.
“The Legislative and Executive Branches of the federal government are best situated to consider any potential tailored measures to address specific instances of interaction between federal and state marijuana laws,” it said.
It noted that Congress amended the federal definition of marijuana when it legalized hemp under the 2018 Farm Bill and said that lawmakers continue “to consider more expansive approaches” to cannabis reform.
“[I]ndeed, shortly after the Court issued its invitations in these cases, the House of Representatives passed legislation that would remove marijuana from the CSA’s list of controlled substances altogether,” the filing said, referencing the passage of the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act. “Refraining from taking up the questions presented here thus represents the sounder course at this time.”
With the spread of the state-level legalization movement—and the growing number of legal cases where these federal-state policy conflicts are emerging such as with these workers compensation challenges—more stakeholders are asking the U.S. Supreme Court to do something to settle the debate.
Even one of the most conservative U.S. Supreme Court justices, Clarence Thomas, denounced the federal government’s inconsistent approach to marijuana policy last year, and he suggested that outright national prohibition may actually be unconstitutional.
At the time, the court declined to take up a case related to an Internal Revenue Service investigation into tax deductions claimed by a Colorado marijuana dispensary. But Thomas issued a statement that more broadly addressed the federal-state marijuana disconnect.
He specifically discussed a 2005 ruling in Gonzales v. Raich, wherein the court narrowly determined that the federal government could enforce prohibition against cannabis cultivation that took place wholly within California based on its authority to regulate interstate commerce.
In 2020, justices declined to hear a case challenging the constitutionality of federal marijuana prohibition.
Congressman Says There’s ‘Tremendous Momentum’ To Pass Marijuana Banking In Bicameral Conference On Manufacturing Bill
A key congressman involved in bicameral negotiations on a large-scale manufacturing bill says he’s optimistic about the prospects of including marijuana banking reform in the final version of the legislation that gets signed into law.
Rep. Earl Blumenauer (D-OR), a longstanding champion of cannabis legalization who is serving as a conferee on the America COMPETES Act, talked about the state of play and steps he’s taking to secure the banking language during a press briefing on Monday.
He said that there is a concerted effort among conferees in both chambers to make sure that the House-passed Secure and Fair Enforcement (SAFE) Banking Act is attached to the final conference report that’s sent to the president’s desk. And while Senate leadership has yet to cede the issue, he’s confident that the bicameral panel will seal the deal.
“There is a strong base support among the conferees for keeping this [marijuana banking] language and enacting it,” he said. “We think that this is a perfect opportunity to get some actual movement on this.”
“We’ve got a vehicle that needs to to be acted upon relatively soon. There’s broad support for it,” the Congressional Cannabis Caucus co-chair, who led a letter to leadership late last month that stressed the urgency of enacting the banking reform, said. “I think that there’s tremendous momentum.”
The conference committee held its first meeting on the America COMPETES Act last week, with multiple appointed conferees urging the body to attach the SAFE Banking Act language in the interest of economic competitiveness and public safety.
Rep. Maxine Waters (D-CA), who chairs the House Financial Services Committee and previously listed marijuana banking as a legislative priority ahead of the conference, said that the bipartisan nature of the reform proposal is “evident” based on the fact that the House included it in the chamber’s version of the manufacturing bill before it was removed in the Senate.
Additionally, nearly a quarter of all senators sent a bipartisan letter last week urging that cannabis banking be included in the final bill.
The third-highest-ranking Democratic member in the Senate, Sen. Patty Murray (D-WA), has taken special interest in marijuana banking reform, describing it as a priority of hers as an appointed member on the bicameral conference committee.
She said last week that she hopes “we can all come to an agreement to keep SAFE Banking in our final bill so that cannabis stores in states like mine do not have to operate entirely in cash.”
Blumenauer said on Monday that he believes that the conference could finalize its report within “the next couple of months” ahead of the summer recess, if not sooner.
Despite continually passing though the House, the Senate has been reluctant to advance the measure under Democratic and Republican control. Current Senate leadership has insisted on passing comprehensive legalization legislation first before the cannabis banking bill.
A top aide for Senate Majority Leader Chuck Schumer (D-NY), who is working to finalize his own legalization bill, recently tempered expectations about the prospects of moving marijuana banking through the America COMPETES Act.
Asked by Marijuana Moment whether there are any specific, equity-centered policies that he’s discussed adding to the SAFE Banking Act with Senate leadership, Blumenauer said that he’d “prefer not to go into” discussions he may have had with Senate colleagues, and he put the onus on the opposite chamber to propose any specific changes that would make the legislation more palatable to them.
“They have the opportunity to move something forward, and I welcome those efforts,” he said. “I’m perfectly willing to work with them as far as they can go as long as it doesn’t get in the way of solving this.”
The standalone Senate version of the SAFE Banking Act currently has 42 cosponsors, including nine Republicans.
That reluctance on the Senate side was also the subject of a letter that SAFE Banking Act sponsor Rep. Ed Perlmutter (D-CO) sent to leadership last month.
In a previous statement to Marijuana Moment, Perlmutter pointed out that “more than two-thirds of the conferees have already voted for or cosponsored the SAFE Banking Act.”
The congressman has even made a point to talk about enacting the reform legislation during committee hearings on ostensibly unrelated or wider-ranging legislation, like at a recent House Rules Committee hearing.
Despite recently saying that he’s “confident” that the Senate will take up his bill this session, Perlmutter recognized that while he’s supportive of revisions related to criminal justice reform, taxation, research and other issues, he knows that “as we expand this thing, then we start losing votes, particularly Republican votes and we got enough votes in the Senate to do it” as is.
Meanwhile, the governor, attorney general and other top officials in Washington State sent a letter to congressional leaders earlier this month, again emphasizing the urgent need to pass marijuana banking reform as a public safety imperative.
Separately, Washington State officials also recently held a virtual roundtable to address the spate of deadly robberies targeting marijuana retailers, with regulators reiterating their call for a federal policy change and discussing steps the state can take on its own while Congress fails to act.
Washington State’s treasurer has been especially vocal about the need for congressional reform, and he wrote in a recent letter to his colleagues in other states that it’s “just not safe to have this financial volume in cash.”
He made similar remarks at a recent conference of the National Association of State Treasurers (NAST). And Colorado Treasurer Dave Young echoed that sentiment in a recent interview with Marijuana Moment.
In the absence of congressional action, more states are moving to enact marijuana banking reform policies on their own. For example, Pennsylvania House lawmakers filed a companion bill to a Senate-passed measure late last month that would provide banking protections and tax relief for marijuana businesses.
Meanwhile, the number of banks that report working with marijuana businesses ticked up again near the end of 2021, according to recently released federal data.
It’s not clear if the increase is related to congressional moves to pass a bipartisan cannabis banking reform bill, but the figures from the Financial Crimes Enforcement Network (FinCEN) signal that financial institutions continue to feel more comfortable servicing businesses in state-legal markets.
Some Republicans are scratching their heads about how Democrats have so far failed to pass the modest banking reform with majorities in both chambers and control of the White House, too. For example, Rep. Rand Paul (R-KY) criticized his Democratic colleagues over the issue in December.
California Gov. Gavin Newsom Adds Tax Cuts in Revised Budget Proposal
Newsom announced the revision proposal on May 13, which aims to set aside $150 million in order to “temporarily reduce taxes” and simplify the tax structure, while $21 million will go toward local governments to help expand cannabis’s retail footprint.
Newsom said in response to a question from a Bloomberg reporter that he is “…addressing the persistent issue that is exactly what we anticipated would be a persistent issue—and that’s dealing with the black market, going after the illegal growers and the illegal operators,” Newsom explained. “Trying to level-set, trying to be flexible in terms of the cost pressures related to the current tax structure, and the lack thereof, in the black market.”
“This is [the] beginning of a process from my humble perspective, in terms of my thinking,” Newsom continued. “This will be a multi-year process to get that black market, get it on the retreat—not the ascendancy—and to get the retail and responsible adult-use market on steady ground.”
In conjunction with Newsom’s statement, the Department of Cannabis Control also released a statement from Director Nicole Elliot. “We have heard from many of you who have said that the current cannabis tax framework is overly complex,” Elliot wrote. “We know that current tax policies disproportionately burden cannabis farmers and small businesses and create instability throughout the supply chain, ultimately undermining the societal benefits of a taxed and regulated market.”
She summarized some of the changes in the proposal, which includes setting the cultivation tax to zero starting on July 1, strengthening tax enforcement policies, altering the deadline for collecting excise tax, and more. “I share this information because I wanted you all to know about the work the Governor’s Office is doing to support our collective efforts,” Elliot concluded. “Creating a sustainable, safe, equitable, and legal cannabis market in our state is no small feat—it is a labor of love, and it takes all of us working together to help make this a reality.”
The Reason Foundation, which promotes libertarian values, recently analyzed the possible results of altering the current cannabis tax. Ultimately, the organization recommended to repeal or suspend the current cultivation tax, reduce retail excise taxes, or pursue other methods to garner interest from local governments. “Tax costs are a significant component of retail prices and this analysis shows that a reduction in taxes can make legal products more price-competitive with illegal products and lure more consumers into the regulated market. This overall market growth will quickly displace the lost revenue resulting from a reduction in tax rates,” the Reason Foundation concluded.
Newsom initially unveiled his budget proposal for the 2022-2023 fiscal year in January, stating that he strives to make positive changes. “It is my goal to look at tax policy to stabilize markets; at the same time, it’s also my goal to get these municipalities to wake up to the opportunities to get rid of the illegal market and the illicit market and provide support and a regulatory framework for the legal market,” Newsom said. He shared that $595 million of cannabis tax revenue became available to fund substance abuse treatment efforts, environmental remediation illegal cultivation sites, and public safety activities.
In June 2021, Newsom proposed a $100 million package “to be provided as grants to cities and counties to help cannabis businesses transition from provisional to regular licenses.” Seventeen cities and counties were chosen to receive this grant.
Meanwhile, in late April, Assembly Bill 2691 was approved to allow small cannabis business owners to take their products directly to consumers at cannabis farmers markets and other special events. According to Assemblymember Jim Wood, who introduced the measure, this will help small cannabis businesses navigate through the various challenges of high taxes and competition with larger businesses, and will help increase visibility among local consumers.
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