Jimi DevineThis week is proving to be another big one for cannabis in Washington, D.C., and nowhere will the resulting progress be felt more than the world’s largest legal cannabis marketplace in Los Angeles.
On Tuesday, the issues of descheduling, banking for all, and equity in the industry for the communities hit hardest by the War on Drugs were the stars of the show, on Mueller Testimony Eve at that. The most powerful Democrat on the House Judiciary Committee, Jerry Nadler, and presidential candidate Kamala Harris filed companion bills in both houses for the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act.
Advocates have described The MORE Act as one of the best federal cannabis bills ever. Nadler’s team was able to pick from all the most useful federal cannabis language that has come before while collaborating with the Cannabis Caucus. The biggest thing is the bill would remove cannabis from the controlled substance list. At the same time, a 5 percent federal sales tax would be established to open an Office of Cannabis Justice. Some of the cash would also go toward Small Business Administration programs for folks participating in local and state equity cannabis programs.
While The MORE Act drove a lot of the day’s enthusiasm, the lead-up to the Senate Committee on Banking, Housing, and Urban Affairs’ hearing on the challenges of cannabis banking featured a week of folks preparing to see where the cannabis banking debate would go next.
Cannabis Trade Federation Chairman John Lord represented the cannabis industry in a hearing that featured supporting testimony from Sen. Jeff Merkley (D-Oregon) and Rep. Ed Perlmutter (D-Colorado), who filed the banking reform bills in their respective chambers.
“Due to the dichotomy between state and federal laws, banks and credit unions have been reluctant to serve cannabis businesses or have refused to do so altogether,” Lord told lawmakers, “In some cases, banks that were willing to work with cannabis companies were discouraged or prevented from doing so by their regulators. As a result, we have frequently struggled to obtain and maintain bank accounts with egregiously high fees.”
Following the hearing, we spoke with the Cannabis Trade Federation’s CEO Neal Levine on the phone from the streets of Capitol Hill. After noting cannabis is still an industry of the 1 percent, we asked Levine how important banking access was to leveling the playing field and lowering the bar for entry locally.
Levine replied with how intricately all the federal cannabis bills were connected and that there was no single fix, “But in our opinion, coming from the CTF point of view, there is no such thing as a bad cannabis policy reform bill and a good one. Any bill that works toward or ends prohibition is a good bill and should be supported.” Levine said as an industry with a workforce now running into the hundreds of thousands, cannabis has real-world issues that need to be addressed.
Levine believes banking is key to helping small operators, but so is 280e tax reform and getting rid of the threat of having your door kicked in for running a state-legal business.
Sahar Ayinehsazia (Courtesy of Vicente Sederberg)
Sahar Ayinehsazian is an attorney in the L.A. office of Vicente Sederberg LLP, one of the nation’s leading cannabis law firms with locations on both coasts and Colorado. Ayinehsazian focuses on cannabis banking, corporate transactions and regulations. A couple of hours before moderating the National Cannabis Industry Association’s banking panel at their annual conference in San Jose, Ayinehsazian jumped on the phone with us to give her take on how the day’s news could impact the LA Marketplace.
With L.A.’s equity program the center of much discussion lately, we asked Ayinehsazian how important banking access was to prevent those small businesses from having to deal with predatory practices previously highlighted by the city’s chief pot regulator Cat Packer. Ayinehsazian quickly replied banking access was important to any business whether they are an equity permit holder or a multistate operator.
“Because it really is the lifeblood of a business. It makes it possible for you yo be able to make money, bank money, know where that money is going. But especially for these smaller operators, the ability to bank is huge because it’s essentially one less thing for them to worry about,” Ayinehsazian told L.A. Weekly.
Knowing they have a normal banking relationship with their financial services provider is going to open a lot of doors for small cannabis businesses who have held on by a thread against the perpetual waves of big money entering the industry. In the current status quo, funds could be lost to shady financial service providers never to be recouped. The smaller the business, the more devastation it can face from such an event.
Ayinehsazian went on to speak on how the financial services available to the L.A. cannabis industry have matured to what we’re seeing today.
“I think L.A. is a good representative of the California banking situation has evolved,” Ayinehsazian said, “Which is it’s a lot better this year than last year or two years ago. There is certainly a lot more access.” Ayinehsazian said the state licensing program has been huge because it’s a lot easier for a bank to track cannabis money when it’s from a licensed operator.
“So do I think the cannabis banking landscape in L.A. is perfect? No. Do I think it’s a lot better than it was and is on the right track moving to where it needs to be? Absolutely,” Ayinehsazian said.
With L.A. being the biggest regulates pot market on the planet doesn’t it simply have to get there for legalization to be a success?
“Yeah,” Ayinehsazian replied, “there is no way you can operate in cash in any industry. Whether it’s the shoe store industry or the cannabis industry.” First Ayinehsazian pointed to the public safety aspects for operators and the officials that have to take massive tax payments in cash. “That much cash sitting anywhere isn’t good for anyone. It makes it infinitely harder to operate as a business,” Ayinehsazian said.
She went on to say if the banking issue started trending in the opposite direction from what we’ve seen the past couple of years it could be a big problem. We asked with the amount of big money capital now invested in the industry, would it be harder for the ball to roll backward?
“Absolutely. The financial institutions, especially the state-chartered ones and smaller guys looking to grow their assets and grow their deposits, recognize that the cannabis industry is in a place where it’s not as dangerous, and risky, and taboo as it used to be,” she replied.
These institutions see the legitimate operators and the big money they are starting to deal with. Ayinehsazian said the institutions see others growing their business, “and that recognition that it is doable, it is possible,” she said, “I don’t really think it we’re going to see a backward trend.
Ayinehsazian explained how critical she sees the SAFE Banking Act to the expansion of banking access locally.
“You have financial institutions in Southern California that have tentatively been looking at the industry, thinking about it,” Ayinehsazian said. “I think the SAFE Banking Act’s progression to where it is now, just in the hearings we’re having, is hugely encouraging for them. They see cannabis banking being talked about in a positive way on the federal front.”
Ayinehsazian believes the bill is one of the best things that can happen for the cannabis industry and L.A. She said it won’t just be the big guys because smaller entities, like equity applicants, will have access just as easily.
Currently, state-backed credit unions are one of the best options for businesses according to Ayinehsazian, and they still will be after reforms pass. But some have been pushing for an independent credit union specifically for the cannabis industry. We asked Ayinehsazian her take on the idea.
“I’m always very hesitant to think about a bank of cannabis. Whether it’s put on privately or put on by the state,” she replied. If the state were to do something more inclusive to a variety of other industries it would be a workable model, “but I don’t know the state credit union or bank that’s just for the cannabis industry is going to be feasible. You never want to have an overconcentration of any industry ina financial institution. Because if that industry goes downhill, the financial institution takes an incredibly large hit.”
Ayinehsazian said the cannabis industry is no different and is susceptible to losses.
The Cannabis Caucus’ co-chairs Rep. Earl Blumenauer (OR-03) and Rep. Barbara Lee (CA-13) held a media call Tuesday night to go over the day’s success. 
“Chairman Nadler and I have been working on this issue for decades,” said Rep. Blumenauer. “I applaud the Chairman for introducing this comprehensive legislation to end the federal prohibition of cannabis and address the injustice brought on by the war on drugs. This is our blueprint in action and a monumental step forward. With the continued leadership of the Cannabis Caucus, Congresswoman Lee, and Chairman Nadler, we will get this right and end the failed prohibition of cannabis.”
We asked the co-chairs how important the banking aspect was to the equity programs being successful for the communities they are trying to serve and in helping to assist in the continued dismantling of cannabis prohibition as a whole.
“It is absolutely essential that we enable this emerging industry to have full access to banking services,” Blumenauer told L.A. Weekly, noting The SAFE Act had made it out of committee by a bipartisan vote. “Access is to banking is critical to enable this to be done in a rational fashion. The banking component, however, is not completely solved by The SAFE Act. The Nadler bill, by actually descheduling cannabis, solves the problem completely.”
Blumenauer said he has supported The SAFE ACT, “but [The MORE act] is a better solution. By including descheduling”
Lee followed up, “let me add to that on the banking side. Because this is a legitimate industry. And a legitimate industry should have legitimate recognized banking access to financial services.”
Lee went on to speak on the social justice aspects of the banking issue.
“People of color, especially black and brown people who have been incarcerated or have these charges against them as a result of the criminalization of marijuana,” Lee said. ” Access to banking and financial services, and access to capital so that they can start their own businesses is extremely important. Because this industry is a profit-making industry. It creates jobs. People should be able to go to banks, access capital, and get a loan, a line of credit, whatever it takes to start their business. To be profitable and to create jobs.”