Twenty Democratic Senators and members of the House of Representatives have penned a letter to federal financial regulators urging them to revise regulations that impede cannabis business owners with prior convictions for marijuana-related offenses. The lawmakers are calling for an amendment to promote equity in providing financial services to state-approved marijuana businesses. In their letter to the Treasury Department, the group stated that the proposed modification “would be an important step to promote fairness in the provision of financial services to marijuana businesses that participate in state-sanctioned marijuana activity.”
In 2014, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued guidance that requires banks and credit unions to view past marijuana-related convictions of business owners as “red flags” that could hinder the business’s access to loans and financial services. Unfortunately, there are no exceptions for businesses operating legally in states that have legalized cannabis.
On November 14, Democratic lawmakers wrote a letter expressing their dissatisfaction with the federal guidance, stating that it is unjust and does not consider the legalization of cannabis at the state level. They emphasize that this policy could prevent businesses owned by individuals with a past marijuana possession conviction from obtaining financing, despite some states’ efforts to expunge such convictions.
According to the lawmakers’ letter, the red flag guidance may allow a person who owns a marijuana business and has a previous marijuana-related conviction to participate in a state licensing program. However, in reality, this person may still face the challenge of being unable to secure a bank loan due to being classified as a high-risk customer.
A group of Congressional Democrats, which included Senators Elizabeth Warren and Edward Markey of Massachusetts, Jeff Merkley and Ron Wyden of Oregon, Raphael Warnock of Georgia, Cory Booker of New Jersey, Chris Van Hollen of Maryland, Amy Klobuchar and Tina Smith of Minnesota, Brian Schatz of Hawaii, Bernie Sanders and Peter Welch of Vermont, and John Fetterman of Pennsylvania, signed a letter that was addressed to Treasury Secretary Janet Yellen and FinCEN Director Andrea Gacki.
Representatives Earl Blumenauer and Val Hoyle from Oregon, Barbara Lee and Katie Porter from California, Jan Schakowsky from Illinois, Eleanor Holmes Norton from Washington, D.C., and Becca Balint from Vermont were among the House members who signed the letter.
Current Policy Continues Disproportionate Harm of Prohibition
In their letter, the lawmakers highlighted the fact that the current policy unfairly impacts businesses owned by people of color. This is because these individuals are more likely to have been convicted of a marijuana-related offense, even though they did not necessarily violate marijuana use laws more frequently than others. Therefore, they urged FinCEN to revise its guidance to align with the evolving cannabis policies at the state level. They specifically called for individuals who have been pardoned or convicted of an act that is no longer a state crime to have unrestricted access to financial services. This would prevent them from being flagged by their bank or credit union.
In a recent letter to the Financial Crimes Enforcement Network (FinCEN), lawmakers emphasized the importance of clarifying the guidelines regarding state-sanctioned marijuana activities. The lawmakers proposed that if a marijuana-related offense has been expunged, pardoned, is no longer illegal under state law, or is not a disqualifier for obtaining a state marijuana license or permit, then financial institutions should not flag it as a potential issue when conducting due diligence on marijuana businesses. This update would provide much-needed clarity for financial institutions operating in states where marijuana has been legalized.
The letter emphasizes the significance of promoting fairness in providing financial services to marijuana businesses that are involved in state-sanctioned marijuana activity.
Cannabis Industry Applauds Proposed Policy Change
Representatives from the regulated marijuana industry have expressed their support for the letter that calls for an end to the red flag designations for cannabis business owners with prior weed-related convictions. The executive director of The Chamber of Cannabis, Bri Padilla, stated that they fully endorse the proposed policy changes to the current Treasury Department guidance.
According to a statement from the industry group to High Times, Padilla argues that the guidance is not only outdated but also obstructs the ability of cannabis licensees, particularly minority-owned operators and small business owners, to effectively participate in the cannabis economy since legal cannabis markets are now available in 38 states. The statement further stresses that shifting away from the current guidance could serve as a critical step in addressing the disproportionate impact on communities of color due to past cannabis-related convictions.
According to Jeffrey M. Zucker, the co-founder and president of Green Lion Partners, a cannabis industry consulting firm based in Denver, the potential policy change would mark another significant step in the federal government’s gradual shift on cannabis policy. Earlier this year, the Department of Health and Human Services urged the Drug Enforcement Administration to reclassify marijuana under federal drug laws, which also contributed to this evolution.
According to Zucker, recognizing state laws that have legalized recreational marijuana would bring the federal government’s guidance in line with the changing cannabis legalization landscape. He added that federal commentary could motivate more people to invest in the industry, leading to economic growth and job creation.