A bill that would allow banks to take state-legalized cannabis businesses as customers advanced through the Senate Banking Committee Wednesday, the furthest such legislation has made it in the Senate.
The committee voted 14-9 to advance the bill that was the result of a bipartisan compromise to bring progressive Democrats, including Chairman Sherrod Brown, D-Ohio, on board. While the bill advanced through committee with bipartisan support, some Democrats raised concerns about the legislation’s failure to address the harm caused by the criminalization of marijuana, injecting uncertainty into its prospects on the Senate floor.
“Cannabis banking is just one part of the necessary conversation about marijuana policy. There’s still much work that needs to be done to acknowledge and mend the damage done by the war on drugs,” Brown said. “Regardless about how you feel about states’ efforts to legalize marijuana, this bipartisan bill is necessary and will make it safer for legal cannabis businesses and service providers to operate to protect their workers.”
The compromise bill, introduced like an earlier version by Sen. Jeff Merkley, D-Ore., included provisions directing banks and their regulators to work to expand access to rural, low- and moderate-income and tribal communities, a win for progressives, though some committee Democrats criticized the bill for doing too little to correct the harms caused by federal drug policy.
Sen. Raphael Warnock, D-Ga., the lone Democrat to vote against the bill, said it would do nothing to help Black communities most hurt by federal drug policy.
“Instead, this bill will make life safer for bankers, for businesses and financial institutions, some of whom have been profiting from the cannabis industry illegally for years, which is ironic given many of the regular folks who illegally sold or used cannabis are sitting in jail cells right now,” he said.
Warnock offered two amendments focused on the racial wealth gap. The first, rejected 3-20, would sunset the bill in five years if it did nothing to help communities hurt by the war on drugs. The second, ruled out of order, would direct the Government Accountability Office to study the number of minority-owned cannabis businesses before and after the bill’s enactment.
“My fear is that if we pass this legislation, if we greenlight this new industry and the fees and the profits to be made off of it without helping those communities, we will just make the comfortable, more comfortable,” he said. “I don’t believe in trickle down economics, and I don’t believe in trickle down justice.”
Sens. Chris Van Hollen, D-Md., and Elizabeth Warren, D-Mass., who voted to advance the bill, said they shared Warnock’s concerns and voted to adopt his amendment. Van Hollen said that he would vote to advance the bill in committee, but wouldn’t necessarily back it on the floor.
“If this committee had jurisdiction over criminal justice matters, I would not vote today to move it forward without a vote on those issues,” Van Hollen said, noting that Majority Leader Charles E. Schumer, D-N.Y., committed to holding a floor vote on a bill that would provide grants to state and local governments to expunge cannabis-related criminal records.
“How I look at it going forward on the floor will depend on both the opportunity to vote on those matters and whether we address those matters,” Van Hollen said.
Schumer said in a statement this month that he would bring the bill to the floor “with all due speed” after the committee advanced it.
He also said he intended to attach two other pieces of House legislation to the final bill. The first, a bipartisan bill introduced by Rep. David Joyce, R-Ohio, and referenced by Van Hollen, would provide grants to state and local governments to expunge cannabis records. The second, introduced by Brian Mast, R-Fla., would guarantee gun rights for marijuana users.
The compromise bill also narrowed language in the earlier version that barred regulators from discouraging banks from working with certain customers for reasons outside safety and soundness concerns or legal violations.
The new language would make clear that regulators can’t discourage banks from serving a group of customers based on reputational risk or political considerations, but also would reiterate that regulators have to ensure banks are operating in a safe and sound manner, and have procedures in place to identify fraudulent or illegal activities.
It would also allow regulators leeway to approach banks if they suspect a customer could engage in an unsafe or unsound activity or behavior requiring the agency to issue a supervisory warning to the bank.
The legislation advanced with support from the bill’s three Republican co-sponsors, Sens. Steve Daines of Montana, Kevin Cramer of North Dakota and Cynthia Lummis of Wyoming, but the compromise language did little to win support from others on the committee.
Sen. Michael D. Crapo, R-Idaho, criticized the changes, saying they allowed regulators too much discretion when deciding whether a group of customers posed a risk to banks. He offered an amendment, rejected 8-15 by the committee, that would replace that section of the bill with provisions to make it more difficult for regulators to pressure banks to cut ties with certain customers.
Other Republicans, including Sen. Mike Rounds, R-S.D., objected to the bill on principle, noting that cannabis is still an illegal substance on the federal level, illustrating the challenges the legislation still faces within the party.
“If it were to become law the bill would give special protections to businesses conducting a federally illicit activity, protections that legal businesses simply do not enjoy,” he said. “Cannabis businesses will forever be considered a protected industry, an industry where banks enjoy substantive immunity from regulations. Meanwhile, legal industries such as firearms or traditional fuel sources still must fight to even hold accounts.”
Ranking member Sen. Tim Scott, R-S.C., a candidate for the Republican nomination for president, shared similar concerns in the past. He voted no by proxy on the underlying bill. Scott is in California for the Republican debate Wednesday.