Legal medical marijuana dispensaries’ security risks don’t just include their cannabis — their lack of access to banking services is a problem, too. Two bills aim to change that.
The Secure and Fair Enforcement Banking Act of 2019, or the SAFE Banking Act, would forbid federal banking regulators from penalizing banks and credit unions for providing financial services to legitimate marijuana-related businesses. The Senate banking committee held a hearing for the bill on Tuesday, July 23.
This bipartisan bill, co-sponsored by Sen. Kevin Cramer, R-N.D., aims to “increase public safety by … reducing the amount of cash at such businesses.”
A similar bill co-sponsored by Rep. Kelly Armstrong, R-N.D., is awaiting a vote in the House.
Currently, banks and credit unions fear repercussions for working with federally illegal businesses. So, a majority of banks do not offer their services, including loans or bank accounts, to cannabis businesses. This means that many legal marijuana dispensaries operate entirely in cash.
Rachel Pross, a representative of the Credit Union National Association who spoke at the committee hearing on the bill, said about half of cannabis dispensaries have had cash stolen. As a result, legal marijuana businesses spendi a significant amount of money on security.
John Lord, the CEO and owner of LivWell Enlightened Health, testified at the hearing and said there were “incredible safety risks” involved with the large amount of cash at certain dispensaries.
In 2016, marine veteran Travis Mason was killed by robbers at a legal dispensary in Aurora, Colo. In an attempted armed robbery of a Los Angeles dispensary, a security guard died and three others were wounded. This incident took place about a year after a security guard was shot and killed at the same dispensary, said the Los Angeles Police Department in a CBS Los Angeles interview.
Though the federal government has not tried to prosecute states for legalizing medical or recreational cannabis and has not gone after legal marijuana users in those states, banks and credit unions still face the possibility of losing their federal insurance or facing penalties. Alerus Bank does not currently provide banking services to legal marijuana businesses and does not have any plans to to do unless legislation or guidelines emerge.
“We had to consider that conflict between state and federal law,” said Karin Taylor, the chief risk officer of Alerus Bank. “We also had to consider what the available regulatory guidance was on the topic and whether we could get comfortable with that conflict and the limited guidance that is out there right now. Ultimately, in the current environment with the conflict and the lack of guidance, we just could not get comfortable.”
Kyle Kingsley, a medical doctor who is the CEO of Vireo Health, a medical marijuana company operating in multiple states, said that his company was able to find banks that would provide services to them. However, credit cards cannot be accepted and the business still deals with an above-average amount of cash.
“We should no longer be a cash business,” Kingsley said. “Our security is completely over the top and that’s how we mitigate any potential risk of the cash … It just adds additional expense on top of the security that’s already there. Cash handling is dangerous — you know, transferring the funds to the bank — all these things add up cost-wise and that gets passed on to our consumers.”
One of Vireo Health's subsidiaries, Minnesota Health Solutions, operates in Minnesota with stores in Moorhead and other cities. The company’s high revenue and reach made it easier for the company to access banking services, Kingsley said, but smaller companies find it much harder to find banks willing to work with them.
Strive Life, a medical marijuana dispensary in Grand Forks, refused comment on the issue, and the Botanist, a dispensary in Fargo, did not respond for comment.
Another issue for the cash-only nature of the industry is it offers an impediment to collecting taxes by the government.
“Keeping those dollars out of banks means we lose the ability to trace where the dollars go,” said Sen. Cory Gardner, R-Colo. “It also means that it’s harder to ensure that all taxes are being paid. It makes it easy for criminals in the illicit market to pose as legitimate, and it leaves hundreds of millions of dollars in cash in the state.”
Because of these issues, the attorneys general of 38 states and territories, including North Dakota Attorney General Wayne Stenehjem, signed a letter in support of the SAFE Banking Act.
However, there was a voice of staunch opposition at the Tuesday hearing. Garth Van Meter, of Smart Approaches to Marijuana, a group opposed to the legalization of marijuana, said his group was concerned that the bill would allow the expansion of the marijuana industry and increase the amount of high-potency products marketed to young demographics.
“By skipping ahead to a technicality over banking rules, the marijuana industry is hoping to gain many of the benefits of federal legalization without a debate over the public health effects,” Van Meter said. “But make no mistake, a policy change around banking would have massive public health ramifications.”
He also had harsh words for banks and credit unions.
“Banks currently want to have it both ways,” Van Meter said. “They say that they are not taking a position on legalization, but they want to profit by depositing federally illegal proceeds.”
Several senators said that they found Van Meter’s arguments compelling, but they want to try and support what their constituents want.
“I tend to fall into the same camp as Sen. Gardner on this in that the people speak and we are representatives of the people so we should move forward,” said Sen. Jon Tester, D-Mont. “Not that I’m any big supporter of it, because I’m not, but nonetheless, we are representatives of the people.”
Kingsley, of Vireo Health, called the SAFE Banking Act one of the most “common-sense” pieces of legislation that he had seen about regulating marijuana.
A committee vote on the SAFE Banking Act has not yet been scheduled for the Senate version of the bill, and the House of Representatives has not scheduled a vote for its version of the SAFE Banking Act.