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Legitimizing the $10 Billion Legal Cannabis Industry

In a clash between the regulatory power of the federal government and American principles of free enterprise and states rights, the cannabis industry continues to struggle for access to U.S. banks. This despite the fact that for years now the market has been wide open for legal recreational and medicinal marijuana sales in most of the country. [1]

Many Republicans, like my former boss, retired congressman Ron Paul, have embraced allowing states to make decisions on whether to allow cannabis for adult use or medical purposes. The people of 36 states have now authorized some level of medical cannabis, and among those, 11 and the District of Columbia have legalized adult use for recreational purposes.

Unfortunately, the federal government still considers these states to be outlaws, because the Controlled Substances Act (CSA) continues to list cannabis as a Schedule 1 banned narcotic. As lawmakers on Capitol Hill push to decriminalize cannabis at the federal level, it makes sense for Washington stand down and at a minimum allow legal businesses to use banking services for cannabis-related purposes.

Why? At the end of 2018, legal cannabis was a $10.4 billion industry [2] in the United States and is projected to grow by billions this year. Yet many businesses are forced to deal in cash only because most banks are still skittish about crossing the feds and taking on cannabis-related customers. This forces businesses to stash huge sums of receipts and denies them access to lines of credit, loans, and even credit cards.

Congress is being urged to fully open up the banking system so that these basic services can be available to what is a burgeoning enterprise in most states. On February 13, the House Financial Services Subcommittee on Consumer Protection and Financial Institutions held a hearing that brought the breadth of the problem into full view. [3] It focused on the the Secure and Fair Enforcement of Banking Act of 2019 [4] (the SAFE ACT), a bipartisan bill sponsored by Congressmen Ed Perlmutter, Denny Heck, Steve Stivers, and Warren Davidson, which would allow state-authorized cannabis businesses to access banking services. This is a reasonable first step towards ending the federal war on cannabis.

In his own testimony on behalf of the Independent Community Bankers of America, Gregory S. Deckard [5], chairman, president, and CEO of the State Bank Northwest in Spokane, said that “the current conflict between state and federal law has created a cloud of legal uncertainty for community banks, inhibited access to the banking system for cannabis-related businesses and created a serious public safety concern.”

Deckard made the case that in his home state of Washington, “while legal under state law, every cannabis business licensed in the state of Washington is illegal under the federal Controlled Substances Act, which puts cannabis in the same category as heroin and LSD.” He noted that “as a financial institution, though chartered by the state of Washington, I am regulated, supervised, and examined by the Federal Deposit Insurance Corporation (FDIC)” and “other state-chartered community banks are regulated by the Federal Reserve.” Therefore, he said, “bankers fear they will be highly critical of loans to businesses that are illegal under federal law.”

In 2013, the  Obama-era “Cole Memo” [6] offered a tacit green light to banks to issue services if they complied with guidance from the Department of Treasury. When Attorney General Jeff Sessions rescinded the memo, that put banks on notice that the guidance was not stable, and many stopped providing these services for fear of putting their institutions in legal danger. The Independent Bankers of America voiced support for the SAFE Banking Act of 2019 as a way to remove legal and regulatory obstacles to cannabis banking.

As a libertarian, I support the full legalization of cannabis and other drugs, yet I understand that Congress may have to take baby steps to get there. And at least with cannabis, states have been taking real action towards legalization in the face of a federal ban. Former representative Dana Rohrabacher led the fight for years to stop the federal government from prosecuting states that have allowed medical cannabis, and his funding rider is still law today. It makes sense for Congress to take the next step and allow banking for legally organized cannabis-related businesses in states that have allowed it.

There aren’t many issues where Republicans and Democrats agree these days, but given the strong desire among the states to legalize cannabis, ending federal interference over this particular drug has become one of them.

Norm Singleton is president of the Campaign for Liberty and a former staffer for Congressman Ron Paul.

24 Comments (Open | Close)

24 Comments To "Legitimizing the $10 Billion Legal Cannabis Industry"

#1 Comment By grin without a cat On March 13, 2019 @ 1:28 pm

Deckard made the case that in his home state of Washington, “while legal under state law, every cannabis business licensed in the state of Washington is illegal under the federal Controlled Substances Act, which puts cannabis in the same category as heroin and LSD.”

Neither heroin nor LSD belong in that category, either, because they both have bona fide medical uses.

#2 Comment By Oleg Gark On March 13, 2019 @ 1:34 pm

Yay, now that pot is legal in many states, let’s grease the skids for a big business takeover of the industry. Sorry, Mom & Pop, you guys just don’t scale.

Does anyone else notice that the Federal Government always plays the bad guy in Libertarian morality tales? It’s as if the Federal Government is an anti-meritocracy that only attracts the most vile and malign people across the land. In addition to their general awfulness, they are also party poopers when it comes to pot (and booze, and cigarettes, and opiates, etc.)

#3 Comment By Fran Macadam On March 13, 2019 @ 3:04 pm

Let’s open up prostitution too, so bankers and government can get their hands on that loot too!

Marijuana use shouldn’t be subject to punishment, but it’s worse than unwise to promote it in a population currently reeling from the effects of all sorts of recreational drug use, legal and illegal.

If you think inhaling another form of smoke into your lungs is healthful, you’re stupid.

It’s becoming that every sort of self-destructive behavior that was sold by organized crime, is now slated to become an operation of government and corporations, but bigger.

#4 Comment By Locksley On March 13, 2019 @ 3:34 pm

One reason pot was fun was that you were getting away with something illegal, under the table. Now the big banks want a piece of the action. I say ‘phooey’! Keep the industry pure, and let it do its business with gold bullion. (That might even help in bringing back the gold standard.)

#5 Comment By EliteCommInc. On March 13, 2019 @ 6:04 pm

It’s nearly incomprehensible to me that men and women with a HS school diploma actually think legalizing marijuana is a good idea.

Another mind altering substance that will eventually become more trouble than its worth — all in the ridiculous call of liberty otherwise known as making a buck.

The costs will outstrip any benefit just as it has with alcohol. Despite the hand ring over pain killers, here we are pressing for another mind numbing substance.

#6 Comment By Whine Merchant On March 13, 2019 @ 9:35 pm

Amazing how many self-proclaimed “conservatives” want “big government” to intrude into personal recreation. Like restrictions on just providing information on birth control and terminating pregnancy, we must not trust the individual to run their own life.

The SJWs cast a lot of aspersions on the GOP, but these issues reveal that many who claim to be conservative are just authoritarian bullies under the veneer of being “conservative”.

Thank you –

#7 Comment By William Gordon On March 13, 2019 @ 9:36 pm

One of the joys of reading TAC, for me a liberal Christian, is learning that there are conservatives out there who are capable of rigorous thought and analysis.’
The usual chorus of purely emotive comments not-withstanding, it’s time for conservatives to stop trying to impose failed prohibitionist laws on everyone else in the country. It didn’t work with alcohol, now that we have 38 states in open defiance of conservative policies, it’s time to rethink at least one plank of conservative policy.

#8 Comment By Fran Macadam On March 13, 2019 @ 11:54 pm

EliteCommInc, these aren’t people with a HS education, they are the overeducated by half.

But as Jim Morrison put it, why not have their kicks before the whole s-house goes up in flames.

#9 Comment By WorkingClass On March 14, 2019 @ 12:51 am

Just how does weed go from a crime to a $10 billion dollar industry?

A sane public policy would simply decriminalize it. People could grow their own and/or grow it to sell to others. Like sweet corn or watermelons.

If big pharma wants to concoct specialized products from weed that are dangerous and therefore require a prescription from a doctor and an insurance policy to pay huge prices then fine. But nobody should be required to participate in such a scam.

And by what logic is the State enriched beyond normal sales and income taxes from commerce in weed? Do we still tolerate sin taxes in this post Christian era?

Weed is ONLY legal if we are “allowed” to grow our own. Otherwise it remains a controlled substance.

Later we can talk about reparations for people who’s lives have been destroyed by imprisonment for simple possession of a naturally occurring herb.

#10 Comment By JeffK On March 14, 2019 @ 8:30 am

@WorkingClass says:
March 14, 2019 at 12:51 am

“Later we can talk about reparations for people who’s lives have been destroyed by imprisonment for simple possession of a naturally occurring herb.”

Exactly. But I would first like to hear an apology from The Conservatives for the serious problems marijuana prohibition has brought us. From about 1/3 of the comments here I doubt there will ever be one. Just like Trump. Never admit you’re wrong.

#11 Comment By JonF On March 14, 2019 @ 8:40 am

Oleg Gark, even mom-and-pop businesses need bank accounts

#12 Comment By James from Durham On March 14, 2019 @ 8:51 am

WE need to understand here that cannabis is hugely harmful. It is known to create psychosis. The victims of the psychotic crims? What about their rights? Will the banks and other institutions pay up for all the victims? How will they bring the dead back to life? Nah, thought not.
There is no way anyone sensible would contemplate promoting cannabis use.
And anyone buying it now should understand that they are pumping money into the same criminal nexus that gives us people trafficking, prostitution, extortion etc etc. It’s a bad thing to do.
And I am not any sort of conservative.

#13 Comment By Greg On March 14, 2019 @ 11:49 am

The mental health and developmental impact of high thc consumption is only now getting attention: too little, too late. When your kid develops psychosis, severe bipolar disorder or even schizophrenia, you might suddenly realize this stuff isn’t harmless. I dont believe it should be illegal but treating cannabis as a “business” is bizarrely myopic.

#14 Comment By JeffK On March 14, 2019 @ 1:45 pm

@James from Durham says:
March 14, 2019 at 8:51 am

“WE need to understand here that cannabis is hugely harmful.” – An opinion not backed up with facts. Alcohol is immensely more harmful to society.

It is known to create psychosis. Psychosis is a complex condition. There is a confirmed relationship between MJ use and psychosis.

“The victims of the psychotic crimes? What about their rights? Will the banks and other institutions pay up for all the victims?” – Manage it like we do alcohol.

“There is no way anyone sensible would contemplate promoting cannabis use.” – Prohibition of MJ costs more to society than usage. Bloomberg looks at the economics.

Alcohol vs cannabis
[7]

Marijuana and psychosis
[8]

Bloomberg
[9]

#15 Comment By Hector_St_Clare On March 14, 2019 @ 4:07 pm

Let’s open up prostitution too, so bankers and government can get their hands on that loot too!

I realise you’re being sarcastic here, but I’d entirely support that proposition.

Sex work should be legal, destigmatized and heavily government-regulated. So should marijuana. And so too, come to that, should be some other soft drugs, including some recreational ones like LSD but also some that are prescription-only today.

Incidentally, you’re aware right that sex work was legal for most of Christian history and that (among other things) some bishops and other church authorities controlled the industry at various points in time?

I don’t like the thought of private banks and private corporations controlling marijuana and prostitution any more than you do, but my problem has to do entirely with the private bankes and <private corporations part, not with the sex and drugs part. Large scale private corporations shouldn’t exist, there’s your problem.

#16 Comment By Stephen J. On March 14, 2019 @ 7:09 pm

The Country Below Has Already Gone Potty.
——
“Canada Goes Dopey”

Canada is going legally and officially dopey
Smoking pot will be acceptable–Canada wide and locally
People can buy different brands of this stinking, smelly weed
That will fulfill any addicted dope’s smoking need

Cannabis candies will soon be available
If you have a sweet tooth they will be saleable
Cannabis cookies will be available to crunch
Some of the dopers on them will munch

Chocolate chip marijuana cookies are another “delicacy”
That will be on sale from the “weed community”
Marijuana-laced drinks are also coming your way
Then at the moon some might want to scream and bay

Some might drive under the influence of the weed
Will we see more accidents because of this seed?
Have any of the politicians that legalized this drug
Thought through the consequences? Or are they just smug?

Children could finish up eating this dangerous weed
When it is sold as candy and the kids want a feed
Perhaps they will chew on a marijuana cookie
Left lying around by a drug-using loony

The big money boys are in on the action to sell us pot
Money has no conscience, nor has its drug promoting cohorts
Governments that are legalizing this mood-changing drug
Want the drug money to roll in and don’t care about fug

This is a land of pot, ruled by a potty political crew
A land of “sunny ways,” and now, smoky ways too
Weed brands will be available, just “pick your poison”
And “thank” the government for drug promoting “consumption”

Governments are spending monetary millions pretending to safely care
While legalizing a mind-altering drug that pollutes the fresh air
Hypocrisy emanates from these greedy pushers for tax money
It will be a cannabis crazy mad show as Canada goes dopey…
[more info on this at link below]

[10]
——
See also:
“Potland goes To Pot”

[11]
———-
And:
“The Land of The Dope”
[12]

#17 Comment By Mighty Whig On March 15, 2019 @ 7:02 am

So, what other harmful drugs do you want to legalize? Be forthcoming, Norm.
America has made a terrible mistake legalizing pot. Even libertarians should recognize the danger.

#18 Comment By Oleg Gark On March 15, 2019 @ 3:47 pm

Legitimacy brings regulation. If you’re a fan of the ganja, why would you wish that on yourself? Pretty soon, you’ll only be able to buy filtered pot at high prices driven by liability insurance and heavy taxes. Plus it will come in packages adorned with health warning labels and the pathetic faces of permafried burnouts.

#19 Comment By EliteCommInc. On March 15, 2019 @ 8:08 pm

“But as Jim Morrison put it, why not have their kicks before the whole s-house goes up in flames.”

laughing.

it is strange.

#20 Comment By Tom On March 16, 2019 @ 11:36 am

Articles like this make it obvious that marijuana legalization was never really about personal freedom or social justice. It was all just about enabling a bunch of rich guys to get even richer all at the expense of public health and safety.

#21 Comment By JeffK On March 17, 2019 @ 6:16 pm

@Tom says:
March 16, 2019 at 11:36 am

“Articles like this make it obvious that marijuana legalization was never really about personal freedom or social justice. It was all just about enabling a bunch of rich guys to get even richer all at the expense of public health and safety.”

There have been millions of proponents of marijuana legalization for decades. They were advocating for both personal freedom and social justice. However, it wasn’t until the big money guys got behind it. Next step, start to buy the politicians. After that, it was just a matter of time.

Cue John Boehner, former Republican Speaker of the House. He is a featured speaker at the upcoming American Cannabis Summit. From the website:

The topics discussed include:

1. How Cannabis could become our next $1 trillion industry
2. Every step to full legalization
3. How the average American can profit from this explosive phenomenon
4. The next market-doubling event
5. Stocks primed to create a new generation of marijuana millionaires
6. How you can become a cannabis angel investor

And much, much more…

[13]

#22 Comment By EliteCommInc. On March 19, 2019 @ 9:23 am

“And much, much more…”

No doubt.

More disrupted families

More work related accidents

More vehicular accidents

More divorce

More emotional disruption

More rehab

More and more and more . . .

And the like the alcohol industry the costs of which will wipe any benefits, probably already the case.

I was thinking of the Jewish pig farmers who lost their pigs over a cliff because Christ had cast a host of demons into them. Naturally the pig farmers were incensed.

Never mind that they were selling a product they were forbidden to consume. I am very tempted by the potential of the industry, but then I may not be into the masses, I am not inclined to impair their brains that would send more of our fellow citizens over the cliff of dysfunction – merely because I could buy a large home near a waterfront.

#23 Comment By samarth dandotiya On March 30, 2019 @ 8:34 am

Articles like this make it obvious that marijuana legalization was never really about personal freedom or social justice.
[14]

#24 Comment By Rajan Tiwari On April 14, 2019 @ 7:00 am

Great article,marijuana is subject to addiction and addict affect our society,it’s not a matter of freedom.
[15]