WASHINGTON — Up until now, the industry's hope for cannabis banking legislation was stymied by apparent obstacles in the Senate. But those efforts got a significant boost this week with comments by Senate Banking Committee Mike Crapo that he is working on a bill.
But his remarks, reported by Politico, left many observers wondering about the details of Crapo's plunge into the issue — what a resulting bill will look like, and whether he will focus on existing legislative proposals or release an entirely new draft.
"Whether he is starting from scratch or starting with existing language this is an important step forward,” said James Ballentine, executive vice president for political affairs and congressional relations at the American Bankers Association.
Crapo, an Idaho Republican, could rely on the framework set out in the SAFE Banking Act, a bill sponsored in the Senate by Cory Gardner, R-Colo., and Jeff Merkley, D-Ore., that already passed the House Financial Services Committee. It would prohibit federal regulators from penalizing institutions for providing depository services to marijuana-related businesses in states where the substance has been legalized. The bill could get a vote in the full House later this month.
But some read into Crapo's comments that his primary interest could be enabling ancillary businesses to readily access the banking system.
Crapo's focus is “not necessarily banking cannabis, but businesses that may be connected some way peripherally with cannabis" that work with the pot industry, said Paul Merski, group executive vice president for congressional relations and strategy at the Independent Community Bankers of America.
Legislative efforts in the Senate could also be closely linked with trying to open up access to the industrial hemp sector, which has enjoyed clearer Republican support.
"We are watching for any discussion of whether Sen. Crapo includes protections for hemp," Jaret Seiberg, an analyst at Cowen Washington Research Group, said in a research note. "Congress legalized hemp last year in the Farm Bill, but hemp producers are still having trouble working with banks as it is hard for banks to be sure that hemp THC levels are low enough for the product to qualify for protection as hemp."
Still, it is unclear if Crapo's comments are enough to get a marijuana banking bill across the finish line. For one thing, Senate Majority Leader Mitch McConnell, R-Ky., is said to be skeptical about efforts to provide more flexibility to the cannabis industry at the federal level.
“We would be surprised if the vote occurred,” said Seiberg. He noted that the process for crafting a bill and getting feedback from other senators and stakeholders “often takes months rather than days.”
Some analysts had previously speculated that the Banking Committee would likely not go further than the
But that assessment has given way to more optimism following Crapo's comments. "We're working to try to get a bill ready," he told Politico. "I'm looking to see whether we can thread the needle." He later suggested particular interest in the effect of legal businesses that cater to the pot industry. "The impact on the ability of small and large businesses to operate justifies our attention."
The Idaho lawmaker could be taking a closer view at the cannabis banking issue out of concern for community banks in his home state.
“I suspect the combination of the support ... from community bankers, plus the need for clarity for other small businesses that interact with cannabis businesses, along with Sen. Gardner’s support, has become enough to offset the political dynamic of some in his caucus not wanting to take a vote before their primaries early next year,” said an industry source who spoke on the condition of anonymity.
Yet the senator's comments still leave a lot open to interpretation.
“We view Chairman Crapo’s comments as more of a suggestion that he will not stop cannabis banking clarity efforts rather than a statement that he will now become its standard-bearer,” Isaac Boltansky, director of policy research at Compass Point Research & Trading, said in a note Friday.
Despite questions about the timing of a vote or the details of the legislative text, Crapo’s comments have left the banking industry hopeful that Congress will eventually enable them to serve legal cannabis businesses.
“If anyone could get something across the finish line, it’s Chairman Crapo,” said Merski, adding that Crapo has worked “in a practical way to get bills signed into law,” such as last year's regulatory relief bill known as S 2155.
The House Financial Services Committee passed in March the Secure and Fair Enforcement Banking Act, or the SAFE Banking Act, in a 45-15 vote, with all of the panel’s Democrats joined by 11 Republicans in advancing the bill out of committee. A bill has been introduced in the Senate, as well as broader legislation that would enable all businesses to skirt the federal ban on pot.
But Crapo’s comments appear to indicate that he may craft his own bill to resolve the issues that bankers face serving legal marijuana businesses.
Ballentine said enough other legislative proposals have been floating around that Crapo could base his proposal on existing language.
"There have been a variety of versions of this legislation that have been crafted, so I don’t foresee this taking a long time," he said. "There is certainly no shortage of interested groups working on this issue that can provide input into the process.”
The legislation could potentially deal with both cannabis and hemp, according to some observers. De-scheduling the latter substance has been a priority for McConnell.
McConnell’s staff was "instrumental in working the hemp issue and some of the concerns with growing and selling hemp,” Merski said. "Banking cannabis could be part of a larger bill” that would address hemp, he added.
Seiberg added that attaching industrial hemp to a marijuana banking bill could motivate McConnell to hold a floor vote in the Senate.
Meanwhile, the SAFE Banking Act could get a House floor vote as early as this month.
“The next step in the cannabis banking saga will be consideration on the House floor, which we believe could occur this month,” Boltansky said. “Once the SAFE Banking Act clears the House, attention will shift to an assessment of the remaining ‘must pass’ legislative vehicles in this Congress.”
But Seiberg said the Senate could still pass the SAFE Banking Act without House passage.
“There is no need for Senate Banking to wait for the House to act before it considers a bill,” Seiberg said.
