Student Blog: The Cannabis Industry is Still Underbanked — Will the Federal Government Step Up?
by Lizbelle Taveras, 2L Editor
The budding cannabis industry is a disruptive force that has crept—and is creeping—its way into a number of other industries. CB Insights has compiled a list of 23 wide-ranging industries that have begun incorporating cannabis products, or will begin to do so in the near future. Such industries include medicine, wellness and beauty, food, law, construction, and more. Legal sales of cannabis, as reported by Associated Press, exceeded $10 billion in 2018, and Cowen’s managing director forecasted cannabis sales to reach $80 billion by 2030.
Despite all the success and revenue being garnered by the cannabis industry, cannabis businesses struggle to find banks that are willing to service them. For example, NPR shared the story of a cannabis business owner who consistently faces dangerous predicaments where he is forced to transport actual bags of millions of dollars to his local Department of Revenue in order to comply with state tax reporting requirements.
By way of federal law, the Controlled Substance Act classifies cannabis as a Schedule I substance; this means cannabis is considered unsafe, has a high potential for abuse, and has no accepted medical use. Furthermore, the Bank Secrecy Act and the Money Laundering Control Act establish strict reporting requirements for banks, and make money laundering a federal crime. These federal regulations, in conjunction with the Schedule I classification, criminalize cannabis and prevent federally-backed institutions from engaging with the cannabis industry.
So what has been done in an attempt to remedy this situation and keep up with the booming industry? Earlier this year, the Secure and Fair Enforcement Banking Act (“SAFE Act”) was introduced in both the House and the Senate. The SAFE Act proposes to “create protections for depository institutions that provide financial services to cannabis-related legitimate businesses and service providers for such businesses.” As reported by NPR and Bloomberg, the enactment of this law would provide banks with the assurances they need to properly serve the cannabis industry, and would eliminate much of the risks of operating an all-cash business. My primary concern is that the SAFE Act does not do enough by way of widespread cannabis reform. For example, Senator Cory Booker has expressed that cannabis reform that focuses solely on the financial industry will cause criminal justice issues related to federal cannabis laws to be further ignored. In order to open the gates for sweeping reform, cannabis ought to be declassified from a Schedule I substance.
Declassification, however, is not being contemplated by the federal government. Any step toward national reform that will allow the cannabis industry to fully flourish is a step in the right direction; and currently, the SAFE Act is the most promising legislation for federal banking reform of the cannabis industry. Its passage is what the nation needs to begin to reap the ample benefits of a thriving, intersectional industry. Whether this opportunity will be taken lies in the hands of the federal government.