Americans’ attitudes toward marijuana use are changing rapidly, and state laws are reflecting that reality. In 2019, nearly two-thirds (62 percent) of Americans say that marijuana should be legalized. As luck would have it, many of them live in states where it has been.
A total of 33 states allow medical marijuana use, and in ten of them plus the District of Columbia, the drug is fully legal. Another 13 states have decriminalized marijuana, meaning that prosecutors either won’t bring charges for marijuana-related offenses, or sentences have been reduced.
This is a huge change from just eight years ago, when only 17 states and the District of Columbia allowed medical marijuana, and recreational marijuana was illegal across the country.
This rapid metamorphosis of state laws has led to a bumpy and confusing start for cannabis businesses that have rushed in to take advantage of the growing legal market. One problem common to cannabis businesses is a lack of access to banking.
Although marijuana use is legal in many states, its use is still a violation of the federal Controlled Substances Act. This means that operating a cannabis business, even one that follows all applicable state laws, might be a federal crime. And that makes other businesses skittish about partnering with them.
The banking industry, in particular, is wary of working with state-licensed cannabis retailers. As a result, many marijuana-based businesses must operate on a cash-only basis. This makes them vulnerable to robberies. It also makes cannabis payroll challenging.
But a new bipartisan bill recently introduced in the Senate would solve this problem. The Secure and Fair Enforcement (SAFE) Banking Act is sponsored by Senators Jeff Merkley (D-OR) and Cory Gardner (R-CO), along with 20 other cosponsors. If enacted, this bill would mean that banks would be shielded from federal punishment for maintaining accounts for state-legal cannabis businesses. Another version of the bill cleared the House Financial Services Committee in March.
Marijuana’s status as a controlled substance under federal law affects how dispensaries track income and pay their employees. Since most cannabis businesses operate on a cash-only basis, the business owners have only a few options for payroll.
Some operate their cannabis payroll by depositing their business earnings into a personal account and then writing checks to employees. Some pay all of their bills–including payroll, taxes, and services–in cash. And others pay extra for the scarce banking and payroll services that are available to them.
This lack of traditional payroll options has a big effect on employees and their personal finances. For one thing, no payroll often means no benefits, so employees of marijuana dispensaries and retailers are on their own for health insurance and other common perks. In addition, it is difficult for these employees to qualify for car loans and mortgages, as lenders won’t allow them to report income from an employer that the federal government considers illegal.
Demetrios Karagiannis, owner and proprietor of Third Day Apothecary, told the Colorado Independent “It’s kind of interesting because I was an engineer for the government for like 25 years, I have an 800 credit score, and I’m stuck with holding cash,” he says. “It’s like, we want to do things the right way, and they won’t even let us.”
There are a few banks in marijuana-legal states who will do business with cannabis employers, but they charge high fees and have long waiting lists.
But if this bill becomes law, all that would change. The SAFE Banking Act would block federal agencies from being able to “prohibit, penalize, or otherwise discourage a depository institution from providing financial services to a cannabis-related legitimate business or service provider or to a State or political subdivision of a State that exercises jurisdiction over cannabis-related legitimate businesses.”
Hopefully, this would make banks more willing to work with marijuana businesses and allow employers access to traditional payroll services, including the administration of benefits.
As we noted above, the House version of this bill has already cleared its first hurdle. It passed out of committee in March. The full House is expected to vote on it in the next few weeks. The Senate bill is not yet scheduled for a committee hearing.
Treasury Secretary Steve Mnuchin indicated during a hearing on April 9 that he would be in support of this legislation.
“If this is something that Congress wants to look at on a bipartisan basis, I’d encourage you to do this,” he said. “This is something where there is a conflict between federal and state law that we and the regulators have no way of dealing with.”
Advocates hope that the Secretary’s support is a positive sign that President Trump would sign the bill into law.
Marijuana is legal for either medical or recreational use or both in many US states. Business owners have responded to the changing laws by opening dispensaries and retail stores that try to operate within the law. But conflicts between federal and state laws have made this difficult, particularly in regard to banking and financial services.
This new legislation might change all that. If passed, it could solve significant payroll and financial problems for the cannabis industry in the US.