Measures making it easier for hemp growers to sell their product may be tucked into legislation that would allow banks to conduct business with state-approved marijuana growers and retailers — giving the pot industry a potential boost with a skeptical Senate.
Rep. Andy Barr, R-Kentucky, says two provisions aimed at helping hemp producers are likely to be added to the House version of the SAFE Banking Act.
The act would give marijuana businesses in the 11 states where it is legal the ability to conduct transactions with federally regulated banks.
The hemp provisions would help growers secure access to credit card processing services, which are reluctant to handle hemp transactions.
The crop was legalized as an agricultural commodity in the 2018 farm bill, largely at Senate Majority Leader Mitch McConnell’s behest. But growers say hemp still falls under the shadow of marijuana, which is legal in an increasing number of states, but not federally.
“Right now a lot of Kentucky hemp farmers and hemp-related businesses are having trouble accessing financial services,” said Barr, a member of the House Financial Services Committee. “Many of these banks and credit unions, they want to serve these businesses, but they don’t want to do anything that would get them in legal trouble.”
Barr noted the bill’s sponsor, Rep. Ed Perlmutter, D-Colorado, “recognizes how important hemp banking is to Sen. McConnell” and that helped to persuade Perlmutter to include the hemp provisions to “increase the profile of the bill in the Senate.”
Perlmutter’s office confirmed that it is considering adding a hemp provision to the legislation, but was still working on the precise language.
McConnell, who has called marijuana hemp’s “illicit cousin,” has opposed marijuana legalization efforts, as have many Republicans. the Kentucky Republican has not commented publicly on the cannabis banking legislation.
McConnell’s office on Wednesday noted he’s aware of the hemp banking problem and has sought to address it. He and Sen. Ron Wyden, D-Oregon, in April sent letters to several federal banking and financial regulatory institutions, requesting that they ease concerns over handling hemp business.
“As hemp is no longer a controlled substance, banks should feel secure in engaging with this industry,” the two said in the letter sent to agencies, including the Federal Deposit Insurance Corporation. “Legal hemp businesses should be treated just like any other businesses and not discriminated against.”
McConnell said last month that the National Credit Union Administration in response said it will more offer more “clarity” and release guidance to federally insured credit unions.
Barr, who said he opposes marijuana legislation, said he’s pressed financial regulators at hearings and in letters for relief for hemp farmers, but has not been satisfied with the results.
Barr’s amendments would create a “safe harbor” for handling hemp transactions, but the suspicious activity reports that are required for marijuana banking would not apply because hemp is legal under federal law. They would also direct federal regulators to issue guidance about best practices and how companies can provide financial services.
Perlmutter’s legislation, which has the support of the American Bankers Association, declares that proceeds from state-licensed cannabis businesses would not be considered unlawful under federal money laundering statutes or any other federal law. Because marijuana remains illegal under federal law, many banking institutions remain wary of dealing with it.
Brian Furnish, an eighth-generation tobacco farmer in Kentucky and one of the first farmers licensed to grow hemp in the state, said companies have been forced to find creative ways to get around the problem. Marijuana is not legal in Kentucky.
“Most big bank card processors are scared of hemp, are scared of taking in payments for marijuana,” Furnish said. He said in one case his company churned through three credit card processing companies in a week. “It’s always a problem.”
Bob Estes, chief executive officer of Lexington’s Daddy Burt Hemp Co., said he’s been able to open a banking account, but has had to scramble to find a credit card processor to handle his business.
“It’s a big burden on an industry that is so young,” he said. “People don’t know the difference between marijuana and hemp and they tend to lump it together.”
Perlmutter’s cannabis banking legislation cleared the House Financial Services Committee in March and could come up for a full House vote as soon as this month.
The legislation has some momentum in the Senate, which has long opposed legalization efforts. The chairman of the Senate Banking Committee told Politico last week that the committee panel will hold a vote on the legislation this year.
Sen. Mike Crapo, R-Idaho, said that although he doesn’t support ending the federal ban on marijuana, he hopes to address the legal and economic conflicts in the growing number of states that permit marijuana sales.
Most banks won’t transact with enterprises deemed illegal by the U.S. government. Cannabis business owners say its left them and their employees vulnerable to thefts and violent crime because many are forced to use cash for all transactions, including salaries for employees.
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