As the federal push to provide safe banking to the cannabis industry has repeatedly stalled in Washington, D.C., some state lawmakers are now trying to take the matter upon themselves.
Most recently, Pennsylvania legislation that aims to authorize financial institutions and insurers to provide services to the state’s medical cannabis business found unanimous support in the Senate Banking and Insurance Committee March 30.
The legislation, Senate Bill 1167, is sponsored by Republican Sen. John DiSanto and has 13 bipartisan co-sponsors. DiSanto serves as the chair of the Banking and Insurance Committee.
“Access to financial and insurance services is essential for operating any business and it is against the public interest to relegate a multibillion-dollar industry to deal in piles of cash,” DiSanto said in a press release. “Banking this cash safely in Pennsylvania provides certainty for businesses, is a huge opportunity to grow our economy, and should ultimately lower costs for medical cannabis consumers.”
Pennsylvania is one of 37 states to legalize medical cannabis, while 18 states and Washington, D.C., have legalized adult-use cannabis.
While some cannabis businesses utilize local and regional banking in the U.S., options are limited with the plant still illegal under federal law. By and large, the cannabis industry operates in cash without federal clarity providing safe harbor to financial institutions servicing cannabis clients.
In part, that’s made many cannabis retailers targets of violent crime. Notably, there was a string of fatal incidents involving cannabis dispensary robberies in Tacoma, Wash., and Seattle earlier this month.
In December 2021, California experienced a mass of robberies in the Bay Area, including “hundreds” of roving caravans taking aim at dispensaries in Oakland.
While U.S. Rep. Ed Perlmutter has provided a beacon of hope to industry stakeholders via his sponsorship of the Secure and Fair Enforcement (SAFE) Banking Act, which has passed the House six times, his legislation has failed to make any sort of meaningful headway in the Senate.
Now, state lawmakers are taking it upon themselves to provide their legal cannabis businesses a means to move away from cash-heavy operations.
Earlier this month in Oklahoma, House lawmakers voted 75-11 to pass a bill that aims to create a payment tracking ecosystem, including the development of “hack-resistant” technologies to open the door for convertible virtual currency transactions in the state’s medical cannabis industry.
While the U.S. Treasury’s Financial Crime Enforcement Network (FinCEN) issued guidance in 2014 regarding expectations for financial institutions seeking to provide services to cannabis-related businesses, federal law does not immunize those institutions from prosecution.
As a result, many licensed cannabis businesses have struggled to access traditional banking and insurance services, creating a public safety risk associated with cash operations.
While Pennsylvania’s S.B. 1167 does not require financial institutions and insurers to provide services to state-legal cannabis clients, the proposal grants safe harbor protections from “adverse state regulatory or legal action for servicing the industry,” according to DiSanto’s release.
In addition, the legislation intends to permit Pennsylvania’s medical cannabis operators the ability to deduct ordinary business expenses when filing state taxes, a standard practice for non-cannabis businesses in the state, DiSanto said.
Meredith Buettner, executive director for the Pennsylvania Cannabis Coalition, applauded DiSanto and Sen. Sharif Street, D-Philadelphia, for their work to advance the legislation. Street co-sponsors the bill and serves as minority chair for the Banking and Insurance Committee.
“S.B. 1167 will not only expand financial access for Pennsylvania’s legitimate cannabis-related businesses but will also create significant tax savings for medical marijuana operators that can be passed on to patients without significant loss of revenue for the commonwealth,” Buettner said in the release.
As of March 7, there were 156 medical cannabis dispensaries with product available in Pennsylvania.
Since commercial sales launched in April 2018, the state has recorded $4.8 billion in market sales, including $1.9 billion by growers/processors to dispensaries, and $2.9 billion from dispensaries to customers, according to the Pennsylvania Health Department.