In 10 states across America, state and local governments and their citizens are reaping financial windfalls from legalization and taxation of the cannabis industry, helping them address funding gaps for education, police, transportation and caring for the homeless. And with the expansion of states legalizing adult use of marijuana in 2018, the industry is projected to create 250,000 new jobs in the United States by 2020 alone.
Yet as long as there is a disconnect between federal and state laws regarding cannabis, both the industry and the state economies where marijuana is legal will continue to be under threat.
In a clear sign the cannabis industry believes the U.S. market is primed for explosive growth over the next few years, several Canadian companies went public on the New York Stock Exchange and the NASDAQ last year. And MedMen, a rapidly growing U.S. company whose innovative marketing campaigns are helping move the industry into the mainstream and away from “stoner culture” perceptions, went public on the Canadian Securities Exchange. MedMen also recently opened a store on Manhattan’s 5th Avenue, a street that other iconic brands such as Apple, Louis Vuitton and Nike call home.
It appears that the new Congress has taken notice and may finally be ready to take action and respect the will of the people who have voted to legalize medical and recreational cannabis use in their states. While current law prohibits the federal government from pursuing cases in states that have legalized medical marijuana, a great deal of regulatory uncertainty remains.
This is due to the federal cannabis ban under the Controlled Substances Act and related anti-money laundering laws intended to stop illegal drug money from finding its way into our financial institutions. The upshot is that legal cannabis businesses are finding it difficult, if not impossible, to obtain even basic financial services, as banks fear running afoul of the federal government.
In an attempt to bridge the regulatory gap, the House Financial Services Subcommittee on Consumer Protection and Financial Institutions recently held a compelling hearing to evaluate new legislation that would align federal and state laws with respect to banking services for the cannabis industry. The SAFE Banking Act of 2019, a bipartisan bill led by Congressman Ed Perlmutter (D-Colo.), would allow banks to service the industry and exempt financial institutions from prosecution for doing business with legal, “state-authorized, cannabis-related” businesses.
Until cannabis is removed from the Controlled Substances Act, proposals such as the SAFE Banking Act provide legal clarity where federal and state laws diverge. The legislation also respects the principles of federalism and states’ rights by only allowing banks to service businesses in states where cannabis is legal, and it’s an important step for a burgeoning industry seeking greater legitimacy among consumers, regulators and investors.
The SAFE Banking Act would also help ensure that revenues earned by legal cannabis businesses are fully traceable, and thereby taxable, especially as states are increasingly viewing cannabis as a way to grow their economies and their tax bases. And as the industry moves out of the shadows into legitimate marketplaces, states are highly bullish on cannabis’ potential as a revenue raiser.
Michigan, which legalized recreational cannabis in the November elections, projects nearly $738 million in tax revenues in the first four years, while Massachusetts is banking on $216 million in the first two years of legalization. With legal cannabis already a $10.4 billion industry in the United States in 2018, as the consumer base grows and more states pursue legalization, supporters of the SAFE Banking Act recognize that federal laws must adapt with the times.
With 66 percent of Americans supporting legal cannabis (the same percentage of states that have legalized recreational or medical marijuana), there is little political risk for lawmakers who see its economic potential and favor practical legislation and regulation to bring the industry into the legal fold in states that have already taken action. At the very least, members of Congress from states that have not legalized cannabis should not deprive other states of their economic self-determination, especially when the SAFE Banking Act only concerns legal markets.
The SAFE Banking Act is a sensible bill that would give legal businesses the right to access services available to any other individual or company. It’s time for Congress to stop ignoring the fact that cannabis is a legitimate industry in the United States and pass legislation to ensure a safe, regulated market in states that choose to adopt it.
Demetrios Karoutsos is a political and public affairs strategist.
Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Updated submission guidelines can be found here.