Marijuana is banking that protection gains momentum in Senate

A Senate panel is set to advance revised legislation that would prohibit federal regulators from penalizing a bank for providing financial services to a legitimate cannabis business, a change that would check a major item on the pot industry’s wish list if Congress can work through sticking points in the bill.

Senate Majority Leader Charles E. Schumer is a vocal champion of the SAFER Banking Act, giving it momentum after the Senate Banking Committee marks up the legislation Wednesday.

The bill ensures that state-approved cannabis businesses have access to deposit accounts, insurance and other financial services while making it easier for customers to use debit and credit cards at pot shops.

Legal pot businesses are counting on passage. The industry ballooned alongside legalization in nearly two dozen states, yet it’s struggling to navigate the tax code and other parts of federal law, which deems marijuana an illegal drug.

“Lack of adequate access to financial services and traditional lending has created a cash-heavy system that puts customers and workers in danger, hinders the efforts of law enforcement and regulators to monitor financial behaviors, and disproportionately harms the ability of small businesses to compete against the underground market and large, well-funded operators,” said Morgan Fox, the political director at NORML, a pro-legalization group. “The status quo only helps criminals and is increasingly untenable.”

Bill sponsor Sen. Steve Daines, Montana Republican, said a favorable committee vote and passage would protect the pot industry and other legal businesses that are caught in the crosswinds of politics, including gun businesses.

“No legal Montana business should be shut out of banks or credit unions. I’m glad to see this bill move through regular order and look forward to it receiving bipartisan support in committee,” Mr. Daines told The Washington Times.

The latest version of the bill requires the Federal Financial Institutions Examination Council to develop uniform guidance and examination procedures for cannabis-related deposits within one year of enactment and says regulators cannot use “personal beliefs or political motivations” to shut down bank accounts.

Senate Banking Committee Chairman Sherrod Brown, Ohio Democrat, said he looks forward to advancing the bill with a “bipartisan majority” and bringing it to the floor.

But sticking points remain.

The bill is opposed by groups that say legal marijuana is a failed experiment and opened the floodgates to wider use of drugs with high amounts of THC, the psychoactive ingredient in cannabis.

“Members of the Senate Banking Committee heard firsthand from those whose lives have been devastated by today’s high-potency THC drug products engineered to increase usage rates, yet they don’t seem to care,” said Luke Niforatos, executive vice president of Smart Approaches to Marijuana. “They know the addiction rates are going up, yet they are putting the profits of big banks ahead of millions now hobbled by drugs. They know the risks of opening the U.S. financial system to transnational cartels who exist to harm Americans, but aren’t willing to stop it.”

Senators have concerns about a part of the bill, Section 10, that makes bank regulators have a valid reason for requesting that a bank shut down a deposit account. They worry the language is so broad it might limit regulators’ ability to intercede when a bank facilitates dubious activity beyond cannabis.

“It would apply to any entity that is engaged with a bank or a customer,” Sen. Jack Reed, Rhode Island Democrat, said at a May hearing. “And it would make it more difficult for federal regulators to raise the alarm about any customers that present a significant risk to the bank.”

However, Mr. Schumer and senators from both parties hailed the latest version of the bill last week, saying it “prevents federal bank regulators from ordering a bank or credit union to close an account based on reputational risk.”

Language in Section 10 is particularly important for Republican sponsors who want to protect an array of businesses. For instance, they want to avoid a repeat of the Obama-era Operation Choke Point, in which the Justice Department investigated banks that worked with firearms dealers.

“The SAFER Banking Act is about keeping our Montana communities safe and reducing the risk of crime, but it’s also an important opportunity to ensure all legal businesses, including firearm manufacturers and energy producers, are protected from the left’s woke agenda,” Mr. Daines said.

The committee probably will have to work through concerns about Section 10 and other provisions during Wednesday’s markup and amendment process.

Some senators fear it will be difficult for the Treasury Department’s Financial Crimes Enforcement Network to update its guidance on marijuana banking within 180 days, as the bill requires.

Others are skittish about revisions that made the bill more expansive by including protection for marijuana employees seeking residential and commercial mortgages through federal programs. They worry it could amount to a backdoor path to legalizing marijuana nationally.

Marijuana industry groups said they expect President Biden to sign the bill if it makes it out of Congress and that the House is waiting for the Senate to act before plotting its steps.

Opponents said both chambers of Congress will be up for grabs in 2024, so lawmakers should think twice before voting in favor of the bill.

“It would be a significant risk for any member, Republican or Democrat‚ to get on the wrong side of parents, educators, law enforcement and health care professionals by supporting this,” Mr. Niforatos said. “Ignoring those who are suffering under the tremendous weight of our nation’s dual addiction and mental health crises in favor of K Street lobbyists and big bankers won’t be forgotten by the people back home.”