Cannabis entrepreneurs in New York and New Jersey sent a letter to Senate Majority Leader Chuck Schumer on Friday, urging him to bring a bill known as the SAFE Banking Act up for a vote before the end of the year.
The bill, which has already passed the House of Representatives seven times since first being introduced in 2013, aims to address the challenges cannabis businesses face in accessing banking services.
Most large banks and credit card companies refuse to work with firms that deal with marijuana directly because the plant is still illegal on the federal level. The federal government has created special guidance to allow financial institutions to operate in this space, but only a minority are willing to take on the extra regulatory burden and the risk of getting charged with a crime such as money laundering if one of their clients raises a red flag.
About 750 small banks and credit unions currently serve the cannabis industry nationwide, according to the U.S. Treasury — a number that’s grown in recent years. But these financial institutions often charge much higher fees and interest rates to cannabis businesses, according to local entrepreneurs who spoke to Gothamist.
Those looking to enter the industry in New York and New Jersey expressed worries about their ability to get small business loans — and the security risks that come with running an all-cash business.
In April, New Jersey allowed a handful of large companies to open the first legal, recreational marijuana dispensaries in the state. But many smaller operators are still working to get their businesses up and running. New York has so far only issued cultivation and manufacturing licenses and regulators are in the process of assessing the first round of dispensary applications.
Banking and public safety
Coss Marte, a Lower East Side resident, is one of the 40 signatories on the letter to Schumer. Marte previously served prison time for drug dealing before starting his own fitness company. He is now applying for a license to run a legal pot shop in New York, as people with past marijuana convictions have priority.
“What's funny is that when I was dealing in the streets, I felt more safe than [I would] being in a store that's saying, ‘Hey, I'm selling cannabis now, and it's all cash,’” Marte said. “Safety is my number one concern coming into this business.”
A spate of robberies has already hit the unlicensed cannabis shops that have sprung up in New York City since recreational marjiuana was legalized in 2021, with thieves taking both goods and cash.
The letter’s signatories are among a larger group of advocates putting pressure on Schumer to get some type of banking reform passed as soon as possible. The NAACP approved a resolution last week calling for the “immediate passage” of the bill.
In July, Schumer introduced a separate piece of legislation known as the Cannabis Administration and Opportunity Act, which would fully decriminalize marijuana on the federal level. Schumer previously expressed reservations about passing more incremental measures such as the SAFE Banking Act, saying it would make it harder to get more comprehensive reform through.
But he has since worked with other lawmakers to craft a compromise bill some are calling SAFE Banking Plus, which would include some additional provisions around social equity. The details of the legislation have not yet been released.
But Paige Tepke, a spokesperson for Schumer, told Gothamist he is working alongside both Democrats and Republicans on a package that would include support for small businesses, measures to increase access to cannabis for veterans, and federal grants for states to expand their efforts to expunge and seal criminal records related to cannabis.
Despite Biden review, federal legalization could still take years
President Joe Biden announced earlier this month he would review the scheduling of marijuana under the Controlled Substances Act. It is currently listed as a Schedule I drug, which means it is considered dangerous and totally lacking in any medical benefit. If it’s descheduled that would effectively decriminalize the drug at the federal level and make the banking issue moot.
But the review process could take years, and it’s unclear what the outcome would be, said Morgan Fox, the political director at the legalization advocacy group National Organization for the Reform of Marijuana Laws.
Fox said he thought fears that banking reform would preclude broader action by Congress were “misplaced.” “That has never been the case,” Fox said.
Those who signed Friday’s letter to Schumer said they recognized the full decriminalization bill “would represent the most significant change to how the federal government treats cannabis.” But they added that it was unlikely to become law this year.
We ask that you champion proposals that can get the necessary bipartisan support to become law...
“Therefore, we ask that you champion proposals that can get the necessary bipartisan support to become law and provide small operators and aspiring entrepreneurs the relief and opportunities they need to support or launch a new cannabis business,” the letter said.
Some Republicans are still resisting the legalization movement, particularly when it comes to recreational, rather than medical, marijuana. Sen. Tom Cotton said in a Senate Judiciary Committee hearing on decriminalization in July that the “marijuana legalization movement is plagued by misinformation” and argued that the SAFE Banking Act wasn’t needed because banks already serve the industry.
But federal reform is increasingly gaining bipartisan support. The SAFE Banking Act currently has nine Republican cosponsors listed in the Senate, along with 31 Democrats and two Independents. Fox said he thought more Republicans would vote in favor of the measure or a similar bill.
Aaron Ghitelman, a spokesperson for the New York Office of Cannabis Management, said the state is “actively having discussions with New York financial institutions to encourage them to work with the emerging cannabis industry.”
But he said there is still a need for federal reform.