On Tuesday, a new $3 trillion coronavirus relief package was unveiled by House Speaker, Nancy Pelosi, with the inclusion of a long-awaited banking reform for the legal cannabis industry. However, despite the bill including more relief for impacted businesses, cannabis companies might not be eligible for these funds.
The cannabis industry has been a cash-only industry ever since its legalization in 1996, due to the outdated federal banking laws. While the laws were intended to curb money laundering by illegal drug cartels, it didn’t foresee the state legalization of cannabis, which is why within the context of federal banking laws, a grower or retailer, although licensed by a legal state, is still seen as an illegal drug runner.
Consequently, at most legal stores, customers are unable to use credit or debit cards, and some workers in the industry are unable to get car or home loans. While smaller banks and credit unions in some states offer simple deposit accounts for state-licensed cannabis businesses, they are accompanied with extremely burdensome documentation requirements which cause the maintenance to be expensive.
The bill is named the Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act, and consists of 1,800 pages, regarding the next phase of COVID-19, which will help with the current public health and economic shock in the country.
Small business relief that cannabis companies could access, were not included in the new bill, right after the denial of previous rounds of coronavirus relief funding due to the illegal status of cannabis under the federal law. Furthermore, cannabis companies were prohibited from applying for federal COVID-19 relief funds, by an outdated Small Business Administration (SBA).
More than 40 members of Congress had signed multiple letters to Congressional leaders, in late April, for the demand of the reformation of SBA. Furthermore, a legislation to address the problem was introduced by Rep. Earl Blumenauer (D-Oregon), and members of Congress were urged for the reformation by a coalition of the reformation of advocates along with criminal justice and civil rights groups.
According to NORML Political Director Justin Strekal, cannabis businesses have been deemed essential in most states, and have been told by the Congress to close down and fire their employees, while also facing tough economic times.
The funding could benefit the cannabis workers nationwide, greatly. According to a national survey, nearly one-third of cannabis companies had said that without the COVID-19 relief funds, they could possibly go out of business. The survey was conducted across all legal states between April 20 and May 5,2020, on 484 cannabis retailers, growers, processors, and hardware and service providers, where 85% claimed that the stimulus money could save their jobs.
According to the executive director of the National Cannabis Roundtable, Saphira Galoob, like other small businesses, cannabis businesses are no exception of the lack of critical financial tools and reliable banking services, which if provided, could potentially remove the hurdles that hold back the potential of the fastest growing sector of the US economy.
The language of the SAFE Banking Act within the HEROES Act was folded by House Democrats , which would allow banks and other financial institutions to, without any fear of federal reprimand, safely work with legalized cannabis companies. Stalled in the Senate, the SAFE Banking Act passed the House in September 2019.
A specification is made in the bill, that the penalization “or otherwise discouragement” of a bank from providing services to a cannabis company, or state and local authorities (responsible for the regulation of the cannabis industry), shall not be allowed for federal regulators.
Individual workers are provided protection as well, as the recommendation or encouragement of banks to refuse or cancel personal accounts of clients, working for licensed cannabis companies, by federal regulators, is prohibited in the bill.
The full bill is available here.