Examining Cannabis Banking Challenges of Small Businesses and Workers (U.S. Senate Committee on Banking, Housing, and Urban Affairs)

Hearing	Examining Cannabis Banking Challenges of Small Businesses and Workers
Committee	U.S. Senate Committee on Banking, Housing, and Urban Affairs
Date	May 11, 2023

 

Hearing Takeaways:

• U.S. Cannabis Policy: The hearing highlighted how the U.S.’s cannabis policy landscape has changed significantly in recent years. 37 states now have legal cannabis for medicinal purposes and 21 states have legal cannabis for recreational purposes. However, cannabis is still considered to be a Schedule I drug under the Controlled Substances Act, which means that the possession, distribution, and sale of cannabis and other cannabis-derived products remains illegal at the federal level. Several Committee Democrats expressed concerns that the federal government’s prohibition of cannabis has disproportionally harmed communities of color and indigenous communities. They stated that these people from these communities are more likely to receive cannabis-related convictions relative to their White counterparts.
• Access to Banking Services Challenges and Impacts for Cannabis Businesses: The tension between federal and state cannabis laws has created challenges for cannabis businesses seeking to access banking services. Many state-authorized cannabis businesses cannot access banking and credit card accounts and payroll services because financial institutions fear that the extension of these services could subject them to prosecution under federal law. These banking access challenges cause many cannabis businesses to rely upon friends and family for funding, transact in cash, and use expensive third-party banking service providers.
  • Current Banking Access for Cannabis Businesses: A key area of debate during the hearing involved whether cannabis businesses have sufficient access to banking services. Dr. Sabet and Ms. Sullivan noted how over 700 financial institutions currently service cannabis businesses in the U.S. Sen. Steve Daines (R-MT), Mr. Oyefeso, and Ms. Packer remarked however that this figure constitutes a small fraction of the U.S.’s total number of financial institutions. They stated that this limited service enables these financial institutions to charge their cannabis business depositors more for banking services, which can render the services prohibitively expensive. Sen. Daines further questioned whether estimates of financial institutions servicing cannabis businesses are overstated as many of these estimates include financial institutions that have only temporarily worked with cannabis businesses. 
  • Public Safety Challenges Posed by the Cannabis’s Legal Status: Most Committee Democrats, Sen. Jeff Merkley (D-OR), Sen. Daines, Mr. Oyefeso, and Ms. Packer noted how cannabis businesses often cannot access banking services and must transact primarily in cash. They raised concerns that the cash intensive nature of these businesses makes cannabis businesses (including retailers, growers, and service providers), employees, and customers vulnerable to robberies. Mr. Oyefeso further warned that many cannabis businesses are scaling back on their security monitoring systems, which leaves their workers more vulnerable to robberies. 
  • Impact on Worker Access to Capital: Full Committee Chairman Sherrod Brown (D-OH) and Mr. Oyefeso noted how the current lack of access to banking services for cannabis businesses leaves many workers unable to prove their incomes. They noted how proof of income is needed to obtain mortgages, car loans, and bank accounts. Full Committee Chairman Brown also remarked that the current legal uncertainty surrounding cannabis can jeopardize access to banking services for the contractors and companies that work with cannabis businesses.
  • Impact on Cannabis Industry Competition: Full Committee Chairman Brown, Mr. Oyefeso, and Ms. Packer expressed concerns that only large cannabis companies possess the requisite money and resources to obtain access to capital and banking services. They stated that this access provides these businesses with a competitive advantage over smaller cannabis businesses, which are more likely to be owned by women, minorities, and veterans. They contended that this dynamic will result in industry consolidation, which will weaken workers in wage and benefit negotiations.
  • Tax Collection Challenges: Ms. Packer stated that the “abnormal” banking environment for cannabis businesses makes it difficult for governments to collect taxes and fees from these businesses. She mentioned how the City of Los Angeles had needed to establish a special cannabis cash collection unit at city hall to address the cash intensive nature of the cannabis industry. She noted that cannabis businesses had needed to make their tax payments in person and commented that this arrangement was burdensome to both cannabis businesses and the city.
  • “Gray Market” Concerns: Sen. Catherine Cortez Masto (D-NV) and Ms. Packer raised concerns over the proliferation of the cannabis “gray market.” They defined “gray market” businesses as unlicensed and unregulated businesses. They stated that this market had emerged in response to the higher costs that consumers pay for legal cannabis, which they attributed to high fees and security expenses.
  • Access to Banking for Hemp Businesses: Sen. Tina Smith (D-MN) and Ms. Packer highlighted how hemp businesses also face challenges accessing banking services, despite how the Agriculture Improvement Act of 2018 had legalized hemp cultivation for commercial users.
• The Secure and Fair Enforcement (SAFE) Banking Act of 2023: The hearing largely focused on consideration of the SAFE Banking Act of 2023, which is proposed bipartisan legislation that protects financial institutions against prosecution or asset forfeiture for providing services to a state-sanctioned cannabis business. Most Committee Democrats, Sen. Jeff Merkley (D-OR), Mr. Oyefeso, and Ms. Packer expressed support for this legislation. Full Committee Ranking Member Tim Scott (R-SC) and Dr. Sabet expressed reservations regarding the legislation.
  • Impact on Public Health: Dr. Sabet expressed concerns that the improved access to capital for the cannabis industry under the SAFE Banking Act of 2023 will lead the cannabis industry to create even more hazardous and potent cannabis products. He warned that these products will drive addiction, misery, and future public health problems. He remarked that cannabis legalization has been associated with emergency room admissions for psychosis, schizophrenia, cannabinoid hyperemesis syndrome (CHS), and other physical ailments. He also raised concerns that bad actors will satisfy the increased demand for cannabis stemming from cannabis legalization through offering cheaper and unregulated cannabis products.
  • Impact on Public Safety: Dr. Sabet warned that the SAFE Banking Act of 2023 would enable banks to engage in federally illegal transactions and make it easier for transnational criminal organizations to set up shell corporations within the U.S. He discussed how cannabis cartel activity is “booming” in states with legal cannabis and mentioned how California had declared a state of emergency to address the cartel activity within the state’s cannabis market. Most Committee Democrats, Sen. Jeff Merkley (D-OR), Sen. Steve Daines (R-MT), Mr. Oyefeso, and Ms. Packer stated however that the SAFE Banking Act of 2023 could reduce the cannabis industry’s heavy reliance on cash (which makes these businesses, their employees, and customers targets for robberies). 
  • Impact on the U.S.’s Ability to Combat Money Laundering and Other Suspicious Activity: Full Committee Ranking Member Scott, Sen. Jack Reed (D-RI), Dr. Sabet, and Ms. Sullivan raised concerns that SAFE Banking Act of 2023 could undermine efforts to combat money laundering and other suspicious activities. Sen. Reed specifically raised concerns that Sec. 10 of the legislation would make it more difficult for federal regulators to raise concerns regarding relationships between banks and customers. He also noted how this section would require banks to provide notice to customers when the federal government suspects that the customers are engaging in illegal activities. He expressed concerns that this section might spur bad actors to take their ill-gotten profits early so as to avoid capture. Ms. Sullivan further raised concerns that the legislation does not address the legacy cash of cannabis businesses, which can be used to foster money laundering. 
  • Impact on Bank Safeguards: Ms. Sullivan also expressed concerns that the current version of the SAFE Banking Act of 2023 will weaken banking standards. She remarked that financial institutions should maintain a strong and robust framework for servicing cannabis businesses. She stated that this framework should entail risk limits approved by a financial institution’s board of directors, appropriate deposit ratios, and source and organization documentation requirements for legacy cash. Full Committee Chairman Brown asserted however that the Committee would not advance any policies that would weaken consumer protections or the safety and soundness of the U.S. banking sector.
  • Impact on Cannabis Business Compliance: Sen. Daines also stated that the SAFE Banking Act of 2023 will greatly increase tax compliance and tax revenues for states. He commented that states, banks, credit unions, insurance companies, and many other service providers (including roofers, plumbers, and electricians) lack clear guidelines for safely and legally transacting with state-sanctioned cannabis businesses. Ms. Sullivan stated however that the legislation would not address the federal legality of cannabis, which could cause lead to policy confusion within the banking industry.
  • Impact on Law Enforcement Agencies: Sen. Daines further stated that the SAFE Banking Act of 2023 would help federal and state law enforcement agencies to distinguish between legal and illegal cannabis businesses. He asserted that permitting cash from legal cannabis businesses to enter the formal banking system will help law enforcement agencies to better prosecute the illicit market. He commented that this ability to better pursue illicit actors within the cannabis space could shrink the overall size of the cannabis market and reduce overall cannabis consumption.
  • Impact on Cannabis Industry Workers: Mr. Oyefeso and Ms. Packer stated that cannabis industry workers often face discrimination and negative stereotyping (as well as an inability to access personal banking services). They asserted that providing access to traditional banking services for the cannabis industry would help to reduce the industry’s stigma.
  • Impact on Equity: Full Committee Chairman Brown, Sen. Merkley, Sen. Tina Smith (D-MN), Mr. Oyefeso, and Ms. Packer argued that the SAFE Banking Act of 2023 could improve equity through increasing access to capital for minority-owned cannabis businesses. They specifically highlighted how the legislation will extend safe harbor protections to minority depository institutions (MDIs) and community development financial institutions (CDFIs).
  • Impact on Other Legal Industries: Full Committee Ranking Member Scott and Sen. Merkley highlighted how the current version of the SAFE Banking Act of 2023 contains a provision to ensure that legal industries would have access to banking services. Full Committee Ranking Member Scott contended that Congress should not extend access to banking services to the cannabis industry (which remains illegal at the federal level) without addressing access barriers to banking services for many legal industries. He indicated that these legal industries include the firearms, oil, and gas industries. 
• Other Cannabis Policy Issues: While the hearing largely focused on the nexus between cannabis policy and banking policy, Committee Members and the hearing’s witnesses used the hearing to highlight other cannabis policy issues.
  • Cannabis Legalization: Several Committee Democrats, and Ms. Packer called on Congress to decriminalize and legalize cannabis at the federal level. They also advocated for expunging previous federal cannabis convictions so that people with these convictions (who are disproportionately African American and Hispanic) can fully participate in the cannabis industry. Full Committee Ranking Member Tim Scott (R-SC) and Dr. Sabet expressed reservations over policy proposals to fully legalize cannabis and stated that such proposals could encourage cannabis consumption.
  • Cannabis Scientific and Medical Research: Full Committee Chairman Sherrod Brown (D-OH) contended that everyone (including veterans) should have access to medical cannabis and recommended that the U.S. support more medical and scientific research regarding cannabis.
  • Drug Education Campaigns: Dr. Sabet recommended that the U.S. recommence an anti-drug media campaign targeted toward children so that children can better understand the health consequences of cannabis.

Hearing Witnesses:

Panel I:

1. The Hon. Jeff Merkley, U.S. Senator, Oregon
2. The Hon. Steve Daines, United States Senator, Montana

Panel II:

1. Mr. Ademola Oyefeso, International Vice President and Director of Legislative and Political Action Department, United Food and Commercial Workers International Union (UFCW)
2. Ms. Michelle Sullivan, Chief Risk & Compliance Officer, Dama Financial
3. Dr. Kevin Sabet, PhD., President and CEO, and Fellow, Smart Approaches to Marijuana, Yale University
4. Ms. Cat Packer, Vice Chair, Cannabis Regulators of Color Coalition

Member Opening Statements:

Full Committee Chairman Sherrod Brown (D-OH):

• He discussed how the U.S.’s cannabis landscape has changed significantly in recent years and mentioned how cannabis has been legalized or decriminalized in nearly every state.
  • He noted how many states and localities have established licensing and social equity programs to ensure that small businesses and communities impacted by the U.S. War on Drugs can participate in the growing legal cannabis industry.
• He remarked that access to banking services is critical for small cannabis businesses and commented that banking access challenges can impede the ability of these businesses to apply for licenses and raise capital.
• He stated that banking and payment system access challenges for cannabis businesses often force these businesses to operate within unregulated spaces.
  • He noted how cannabis businesses cannot access U.S. Small Business Administration (SBA) loans and are more likely to experience denials for their traditional bank loan applications.
• He discussed how the aforementioned access to capital challenges cause many small cannabis businesses to rely upon friends and family for funding, to transact in cash, and to hire expensive third-party service providers for some of their banking needs.
  • He commented that the current need for cannabis businesses to transact in cash makes the employees at these businesses more vulnerable to robberies and facilitates money laundering activities.
• He also noted how the current lack of access to banking services for cannabis businesses leaves many workers unable to prove their incomes, which are needed to obtain mortgages, car loans, and bank accounts.
  • He highlighted how many of the people that work at cannabis businesses are represented by labor unions.
• He further remarked that the current legal uncertainty surrounding cannabis can jeopardize access to banking services for the contractors and companies that work with cannabis businesses.
  • He indicated that these businesses include sheet metal and air conditioning contractors and lawn care and gardening companies.
• He then discussed how the large cannabis companies are dominating the U.S. cannabis market and stated that these companies have ready access to private capital.
• He also asserted that these large cannabis companies are taking advantage of their workers with unfair labor practices to maximize profits.
  • He expressed his support for the cannabis industry workers that are seeking higher wages and safer workplaces.
• He expressed concerns that the growing cannabis industry could become as concentrated as the tobacco industry and commented that this concentration harms workers and small businesses.
  • He commented that these affected small businesses are more likely to be owned by minorities, veterans, and women.
• He stated that Ohio’s community banks and credit unions want to provide financial services to the legal cannabis businesses in their communities and asserted that cannabis businesses and employees should be able to have access to the same types of personal, commercial, and mortgage loans that other customers have.
  • He added that these loans should be provided with the same levels of protection and without additional costs or fees.
• He then remarked that the U.S.’s “overcriminalization” of cannabis has disproportionately harmed communities of color and indigenous communities.
  • He stated that MDIs and CDFIs can help to reach cannabis businesses in overlooked communities and communities that are vulnerable to predatory financial institutions.
• He also asserted that people with prior cannabis convictions (especially in states where cannabis is now legal) should not be barred from participating in economic activities (such as renting property or finding jobs).
• He remarked that the U.S. must ensure that regulators are fully able to protect consumers in the banking system from financial risks.
  • He commented that the U.S. must ensure that cannabis industry stakeholders can access banking services and that the U.S. must maintain its robust anti-money laundering (AML) framework.
• He noted how law enforcement officials have indicated that expanding access to banking services to cannabis businesses can help to improve public safety and enable them to focus on actual criminal activity.
• He stated that cannabis banking is one element of federal cannabis policy and asserted that people should not face criminal penalties for cannabis when other entities are legally profiting from the product.
  • He contended that everyone (including veterans) should have access to medical cannabis and recommended that the U.S. support more medical and scientific research on cannabis.

Full Committee Ranking Member Tim Scott (R-SC):

• He discussed how the states represented on the Committee maintain very different cannabis laws and noted how cannabis remains largely illegal in his state of South Carolina.
  • He expressed concerns over proposals to legalize cannabis.
• He mentioned how cannabis is considered a Schedule I drug under the Controlled Substances Act, which means that the possession, distribution, and sale of cannabis and other cannabis-derived products are illegal.
  • He also indicated that this Schedule I status means that the proceeds from cannabis-related businesses are subject to federal AML laws.
• He noted how the U.S. Department of Justice (DoJ) and national law enforcement groups have expressed concerns that the SAFE Banking Act of 2023 will create “loopholes” in the U.S.’s AML laws.
  • He commented that these “loopholes” would make it harder for the U.S. to catch criminals that traffic weapons, fentanyl, and people.
• He asserted that Congress must work to address these purported “loopholes” within the SAFE Banking Act of 2023.
• He then discussed how some states have legalized cannabis, which has led to the formation of legal state-based cannabis businesses that depend on a relationship with a bank or credit union.
  • He mentioned how he is a former small business owner and commented that a banking relationship is “crucial” for providing safety and stability for companies, their employees, and their customers.
• He expressed interest in exploring how cannabis businesses operate, the complications that these businesses face, and whether the safe harbor provided in the SAFE Banking Act of 2023 would work in practice.
• He then remarked that if the Committee is to consider access to banking services for an industry that is illegal at the federal level, then the Committee must also consider access to banking services for all industries.
  • He noted how certain financial institutions have caved to political pressure and have taken actions to not service certain legal industries, including the firearms, oil, and gas industries.
  • He accused certain financial institutions of hypocrisy for calling on the U.S. to extend banking services to the cannabis industry while blocking access to banking services for other legal industries.
• He stated that Congress must ensure that all legal industries have access to financial institutions and financial services.
  • He noted how the current version of the SAFE Banking Act of 2023 contains a provision to ensure that legal industries would have access to banking services.

Full Committee Chairman Sherrod Brown (D-OH):

• He asserted that the Committee would not advance any cannabis banking policies that would weaken consumer protections or the safety and soundness of the U.S. banking sector.

Panel I Opening Statements:

Sen. Jeff Merkley (D-OR):

• He discussed how he had become involved with developing cannabis banking legislation in response to the problems created by the cannabis sector’s cash economy.
  • He stated that these efforts to develop cannabis banking legislation have always been bipartisan and thanked Sen. Steve Daines (R-MT) for his work on the issue.
• He mentioned how half of U.S. states have some form of legalized cannabis and noted how the cannabis industry supports 428,000 jobs and accounts for $25 billion in retail sales.
  • He indicated that 37 states have legal cannabis for medicinal purposes and that 21 states have legal cannabis for recreational purposes.
  • He highlighted how his state of Oregon had nearly $1 billion in cannabis-related sales in 2022 and mentioned how the taxes generated from these sales help to fund the state’s education, health care, law enforcement, and local needs.
• He remarked that federal law has not kept pace with changing attitudes toward cannabis or changing state and local laws.
• He stated that this failure has denied legitimate cannabis businesses the opportunity to access the same banking services that other businesses can access.
  • He noted how these legitimate cannabis businesses often cannot access banking and credit card accounts and payroll services because financial institutions fear that the provision of these services could result in prosecution under federal law.
• He noted how three-quarters of the U.S. cannabis economy operates entirely in cash and stated that the few financial institutions that work with cannabis businesses charge these businesses “extraordinary” fees.
• He stated that the U.S. cannabis industry’s heavy reliance on cash impacts cannabis growers, cannabis retailers, and other associated businesses
  • He indicated that these associated businesses include fertilizer suppliers, greenhouse operators, and seed suppliers.
  • He added that many of the associated businesses that work with the cannabis industry often risk losing access to their own banking services.
• He also discussed how the U.S. cannabis industry’s limitations on banking access impact the industry’s employees and noted how these employees must be paid in cash.
  • He commented that this cash payment makes these employees vulnerable to robbery whenever they get paid.
• He stated that forcing legal businesses to operate in a cash economy is terrible for accountability and fosters crime.
  • He elaborated that these legal businesses are more vulnerable to violent crime, money laundering, employee theft, and tax fraud because of their dependence on cash.
• He mentioned how Oregon cannabis businesses have experienced 129 robberies over the past 12 months and commented that Oregon’s experience has not been unique.
• He remarked that passage of the SAFE Banking Act of 2023 could address the aforementioned robbery, assault, and money laundering challenges associated with cannabis businesses.
  • He explained that this legislation would ensure that legitimate businesses operating in compliance with state laws will have access to the same financial services as all other businesses.
• He stated that the SAFE Banking Act of 2023 would address the issue of reputational risk being used against certain parts of the economy in an inappropriate way.
• He also noted how the SAFE Banking Act of 2023 would protect financial institutions against prosecution or asset forfeiture for providing services to state-sanctioned cannabis businesses.
  • He emphasized that the law would not force banks to provide services to cannabis businesses and commented that banks will be able to opt to not service these businesses.
• He added that the SAFE Banking Act of 2023 will extend its safe harbor for financial institutions interacting with legal cannabis businesses to CDFIs and MDIs.
• He further mentioned how the SAFE Banking Act of 2023 does include provisions to address concerns around equity, law enforcement, and money laundering.
  • He noted how these concerns had been raised in a 2022 DoJ memorandum.
• He noted how the SAFE Banking Act of 2023 enjoys significant bipartisan and bicameral support and highlighted how the U.S. House of Representatives has advanced this legislation seven times.

Sen. Steve Daines (R-MT):

• He remarked that the current inability of legal cannabis businesses to access financial services is causing legal businesses to face a public safety crisis.
  • He commented that the cash-based nature of these businesses made them appealing targets to robbers and mentioned how Washington state had experienced at least 100 armed robberies at cannabis retail stores in 2022.
• He stated that the SAFE Banking Act of 2023 would help to address this increase in violent crime through providing a safe harbor for financial institutions to transact with state-sanctioned cannabis businesses.
• He disputed the assertion that the SAFE Banking Act of 2023 is not necessary because some banks and credit unions are currently providing financial services to state-sanctioned cannabis businesses.
  • He indicated that only 9 percent of U.S. financial institutions have provided services to any cannabis businesses.
• He stated that the financial institutions servicing cannabis businesses face limited competition and charge cannabis businesses “substantially more” for banking services.
  • He commented that this dynamic causes banking services to be prohibitively expensive for many cannabis businesses.
• He also remarked that the SAFE Banking Act of 2023 would help federal and state law enforcement agencies to distinguish between legal and illegal cannabis businesses.
  • He noted how the total size of the U.S. cannabis market is estimated to be $100 billion and indicated that illicit cannabis production accounts for about 75 percent of this figure.
• He asserted that permitting cash from legal cannabis businesses to enter the formal banking system will help law enforcement agencies to better prosecute the illicit market.
  • He commented that this ability to better pursue illicit actors within the cannabis space could shrink the overall size of the cannabis market and reduce overall cannabis consumption.
• He further stated that the SAFE Banking Act of 2023 will greatly increase tax compliance and tax revenues for states.
• He then discussed how the SAFE Banking Act of 2023 has broad support from states, banks, credit unions, insurance companies, and many other service providers (including roofers, plumbers, and electricians).
  • He noted how these stakeholders currently lack clear guidelines for safely and legally transacting with state-sanctioned cannabis businesses.
• He mentioned how there exists a bipartisan coalition of 38 state and territory attorneys general that have previously supported cannabis banking legislation.
  • He stated that the SAFE Banking Act of 2023 has been strengthened in response to DoJ feedback on previous versions of the legislation.
• He remarked that the SAFE Banking Act of 2023 would not legalize cannabis and commented that he does not support federal legalization of cannabis.
  • He noted how his state of Montana had legalized recreational cannabis through a 2020 ballot initiative and commented that federal laws must account for states that have approved recreational cannabis.

Panel II Opening Statements:

Mr. Ademola Oyefeso (United Food and Commercial Workers International Union):

• He noted how his labor union, the United Food and Commercial Workers International Union (UFCW), represents over 1.3 million workers, including over 10,000 workers in the cannabis industry.
  • He commented that the UFCW seeks to have the cannabis industry provide safe, well-paid, and family sustaining jobs for all of its workers.
• He remarked that the U.S. cannabis industry is unique in that it has a federal prohibition on access to legal banking services.
  • He noted how cannabis industry workers are paid in cash and commented that the cash-heavy nature of cannabis retail creates safety and financial challenges for businesses, customers, and workers. 
• He asserted that Congress must address cannabis banking access issues so that cannabis industry workers will have the same opportunities for advancement and safety as their non-cannabis industry counterparts.
• He discussed how few banks are willing to service cannabis businesses, which creates issues for cannabis workers seeking to obtain personal banking services.
  • He explained how many banks do not recognize paychecks or proof of employment from cannabis industry workers, which can lead these workers to face challenges when seeking personal loans for homes and cars.
• He also stated that cannabis industry workers often face discrimination and negative stereotyping and asserted that providing access to traditional banking services for the cannabis industry would help to reduce the industry’s stigma.
• He further noted how cannabis industry workers are targets for robberies and thefts because they are known to carry cash.
  • He raised concerns that many cannabis businesses are scaling back on their security monitoring systems, which leaves their workers more vulnerable to robberies and thefts.
• He remarked that cannabis banking constitutes an equity issue and called on the U.S. to address communities that have been harmed by the federal War on Drugs.
• He stated that the emerging cannabis industry presents an “unparalleled” opportunity for the U.S. to shape an industry from its conception.
  • He commented that while the U.S. can take several approaches regarding the cannabis industry, he asserted that not all approaches will benefit the industry’s workers.
• He contended that access to banking services for cannabis businesses will ensure that the cannabis industry evolves into a hospitable industry for workers.
• He concluded his opening statement by calling on Congress to extend access to banking services to the cannabis industry.

Dr. Kevin Sabet (Smart Approaches to Marijuana, Yale University):

• He first questioned the Committee’s decision to investigate cannabis banking issues and asserted that the Congress has more pressing issues on its agenda.
  • He indicated that these more pressing issues include a potential default on the U.S.’s national debt payments, a growing drug overdose epidemic, banking sector fragility resulting from recent bank failures, and growing mental health challenges.
• He also expressed concerns that the policies under consideration at the hearing would result in more American youth experimenting with cannabis.
  • He commented that this cannabis experimentation is likely to drive addiction, misery, and future public health problems.
• He stated that modern cannabis is extremely potent and warned that the SAFE Banking Act of 2023 would provide the cannabis industry with access to institutional capital sources.
  • He commented that this access to institutional capital sources will lead the cannabis industry to create even more hazardous cannabis products.
• He also remarked that the SAFE Banking Act of 2023 would open the U.S. to transnational criminal organizations that intend to harm Americans.
• He further asserted that the SAFE Banking Act of 2023 purports to fix a “fake problem” and stated that cannabis businesses are not dealing primarily in cash.
  • He stated that there are numerous banks working with cannabis businesses.
• He then discussed how cannabis has become increasingly potent over the years and stated that newer cannabis products contain very high THC levels.
  • He commented that these very potent cannabis products have a deleterious effect on both the physical and mental health of their users.
• He also warned that large tobacco companies are seeking to enter the cannabis space, which will increase the prevalence of very potent cannabis products in schools and neighborhoods.
• He highlighted how a recently released Danish study had found that cannabis is now responsible for one-third of all schizophrenia cases in young men.
  • He indicated that cannabis is the most common substance found in youth suicides and in youth seeking drug treatment.
  • He also noted how there are now more daily cannabis users than alcohol users in the U.S.
• He mentioned how states have experienced 1,000 percent increases in emergency room admissions for psychosis, schizophrenia, CHS, and other physical ailments following the legalization of cannabis.
  • He further raised concerns that many cannabis retail stores are recommending cannabis to pregnant women, which goes against the medical advice from the U.S.’s most reputable medical associations.
• He then warned that the SAFE Banking Act of 2023 would enable banks to engage in federally illegal transactions and make it easier for transnational criminal organizations to set up shell corporations within the U.S.
  • He also warned that this legislation would empower foreign cartels to target vulnerable populations.
• He stated that banks have a “horrible” track record in terms of addressing money laundering and noted how five former White House Office of National Drug Control Policy (ONDCP) Directors are opposing the SAFE Banking Act of 2023.
  • He indicated that these five former ONDCP Directors come from both Democratic and Republican administrations.
• He discussed how cannabis cartel activity is “booming” in legal states and mentioned how California had declared a state of emergency to address the cartel activity within the state’s cannabis market.
  • He indicated that cartels now dominate about 80 percent of the California cannabis market.
• He then discussed how the U.S. Department of the Treasury has indicated that cannabis businesses currently work with over 800 U.S. banks and noted how multiple state regulatory bodies have admitted that cannabis businesses are receiving financial services from state-regulated banks and credit unions.
  • He mentioned how his organization, Smart Approaches to Marijuana (SAM), had conducted an investigation that found that cannabis retail stores are “more than willing” to accept debit and credit cards (as well as other non-cash alternatives) as a means of payment.
• He stated that he is not advocating for the arrest of cannabis industry workers or cannabis users and is merely opposing efforts to normalize and commercialize increasingly potent forms of cannabis.
  • He highlighted how people of color currently own less than 2 percent of cannabis businesses, there remain racial disparities in cannabis arrests in states where cannabis is legal, youth cannabis arrests are increasing in some instances, and that cannabis stores are disproportionately present in communities of color.
• He warned that policy efforts to further promote cannabis use and availability (such as through the SAFE Banking Act of 2023) would exacerbate the U.S.’s current addiction challenges.

Ms. Michelle Sullivan (Dama Financial):

• She discussed how her financial services company, Dama Financial, is the largest and first end-to-end provider of banking and payment solutions for legal cannabis businesses in the U.S.
• She explained that Dama Financial partners with banks, which enable its clients to have a single relationship with multiple financial solutions.
  • She indicated that these financial solutions include access to banking, merchant services, cash management, payments, point-of-sale (POS) systems, and inventory management.
  • She also mentioned how Dama Financial provides financial solutions for the employees of cannabis businesses.
• She stated that Dama Financial had been founded in 2016 to provide banking access to licensed cannabis-related businesses with a “compliance-first” approach that is based on several government guidances and policies.
  • She indicated that these guidances and policies include the DoJ’s Cole Memorandum, U.S. Financial Crimes Enforcement Network (FinCEN) guidance, Bank Secrecy Act (BSA)/ AML requirements, and all applicable federal and state laws.
• She explained that Dama Financial partners with banks that wish to offer access to banking services for cannabis businesses and that may lack access to the requisite resources and expertise to run a high-risk, cash intensive business and/or banking program on their own.
• She remarked that Dama Financial has developed a “gold standard” of compliance frameworks to ensure that it knows its customers through enhanced due diligence, onboarding, and continued oversight.
  • She stated that Dama Financial’s compliance checks go beyond the existing high-risk banking requirements under federal law through conducting thorough assessments of company ownership structures under FinCEN’s Ultimate Beneficial Ownership (UBO) Rule and through performing onsite inspections and risk assessments throughout the life cycle of the relationship.
• She testified that Dama Financial has rejected “a fair number” of cannabis businesses from qualifying for its services because these businesses either lack transparency or fail to meet her company’s diligence standards.
• She contended that the SAFE Banking Act of 2023 should be made stronger and encompass a more stringent statutory framework.
  • She commented that stakeholders could not simply rely upon existing guidance without more robust federal legislation.
• She expressed concerns that passing the current version of the SAFE Banking Act of 2023 could result in more lax banking standards.
• She remarked that financial institutions should at a minimum follow enhanced rules regarding board-approved risk limits, deposit ratios, and reporting criteria when limits are approached or breached.
  • She also stated that financial students should possess technology and staffing expertise.
  • She further called for enhanced due diligence and ongoing monitoring requirements for financial institutions (especially as it pertains to cash deposits and legacy cash).
• She raised concerns that the current version of the SAFE Banking Act of 2023 could create confusion within the banking industry if passed.
  • She noted how credit card companies maintain policies against banking illegal products and commented that these companies might not permit cannabis transactions to proceed (even if the SAFE Banking Act of 2023 is passed into law).
• She stated that U.S.’s failure to address larger cannabis decriminalization issues would make it difficult for some financial institutions to participate in the cannabis space.
  • She warned that the passage of the SAFE Banking Act of 2023 might foster a false sense of resolution for cannabis policy challenges.
• She lastly discussed how the U.S. currently does provide banking opportunities for cannabis businesses and noted how over 700 financial institutions are working with legal cannabis businesses according to FinCEN.
• She asserted that companies that meet minimum risk standards (such as the standards she had previously discussed) ought to have access to banking services.

Ms. Cat Packer (Cannabis Regulators of Color Coalition):

• She remarked providing legal protections to financial institutions that service state-legal businesses and their workers would constitute a “first step” to addressing banking challenges within the space.
  • She asserted however that this policy would not change the fact that cannabis small businesses and workers are considered to be criminals under federal law.
  • She also asserted that this policy would not address the consequences of the U.S.’s “failed” approach to cannabis.
  • She further asserted that this policy would not address the various cannabis-related concerns and challenges of researchers, doctors, patients, veterans, immigrants, consumers, and state and local governments.
• She remarked that both Congress and the President must act on more comprehensive cannabis reform legislation to address all of the aforementioned issues.
• She then discussed how access to financial services is a necessity for any small business and mentioned how many small cannabis businesses had experienced challenges accessing banking services throughout her previous tenure as executive director of the City of Los Angeles Department of Cannabis Regulation.
  • She recounted how many small cannabis businesses and participants in the City’s social equity program had described a lack of access to capital as their top barrier to entering the legal cannabis market and to remaining competitive once licensed.
• She acknowledged that while Los Angeles’s cannabis market has many unique characteristics, she remarked that other states face similar concerns and challenges regarding inequitable access to capital.
  • She stated that cannabis regulators view access to capital as an opportunity to promote public safety, economic opportunity, and the implementation of an effective regulatory system.
• She contended that policymakers must distinguish between access to banking and fair access to banking.
  • She referenced a 2021 Brookings Institution report that had found that Black individuals and businesses face “marked disparities” compared to their White counterparts in access to banking services, deposits, mortgage credit, and small business loans.
  • She also mentioned how a 2021 U.S. Federal Reserve report had found that Black and Latino owned businesses had been less than half as likely as their White counterparts to be fully approved for loan applications during the previous year.
  • She further highlighted how her organization, Cannabis Regulators of Color, had released a 2022 paper that detailed the differences between expanding access to banking services for cannabis businesses and fair access to banking services for cannabis businesses.
• She applauded the current efforts underway to ensure that the SAFE Banking Act of 2023 would not just provide protections to financial institutions servicing cannabis businesses and would include provisions to ensure fair banking access.
  • She indicated that her written testimony includes additional details on how minor technical amendments to the SAFE Banking Act of 2023 can make the legislation and cannabis banking fairer.
• She noted how existing guidance from federal banking regulators considers criminal records to be a “red flag” that a business is engaged in illegal activity.
• She recommended that Congress update this guidance to clarify that cannabis criminal records would not automatically be considered “red flags” and commented that this change would support efforts to promote fairness.
  • She elaborated that this change should apply to records that have been expunged or that involve activity that has been pardoned or is no longer prohibited under state laws.
• She remarked that Congress must work to ensure that the disparities present within the traditional banking system do not replicate within the cannabis banking system.

Congressional Question Period:

Sen. Jack Reed (D-RI):

• Sen. Reed mentioned how there exists a popular perception that the SAFE Banking Act of 2023 is focused on cannabis sales. He noted however that one section within the legislation (Sec. 10) is applicable to all entities that are engaged in business with a bank, company, or customer. He stated that this section would make it more difficult for federal regulators to raise concerns regarding relationships between banks and customers. He also noted how this section would require banks to provide notice to customers when the federal government suspects that the customers are engaging in illegal activities. He expressed concerns that this section might spur bad actors to prematurely take their ill-gotten profits so as to avoid capture. He mentioned how this section has drawn criticism from multiple consumer groups. He asked Ms. Packer to indicate whether the U.S. should limit the scope of the SAFE Banking Act of 2023 to the cannabis industry.
  • Ms. Packer remarked that her expertise is limited to cannabis banking issues. She stated that if Congress seeks to address additional issues beyond cannabis banking, then Congress should consider these additional issues in another piece of legislation (rather than include the issues within the SAFE Banking Act of 2023).
• Sen. Reed expressed concerns that the SAFE Banking Act of 2023 could prevent federal banking regulators from investigating a relationship between a bank and a suspicious actor (such as a surrogate of a foreign power). He called on Congress to further review and narrow the scope of Sec. 10 of the SAFE Banking Act of 2023.

Full Committee Ranking Member Tim Scott (R-SC):

• Ranking Member Scott asked Ms. Sullivan to explain the SAFE Banking Act of 2023’s safe harbor provision for financial institutions that service cannabis businesses.
  • Ms. Sullivan remarked that the SAFE Banking Act of 2023 (as currently written) does not provide proper governance and controls to ensure that the financial services provided to cannabis businesses are legitimate. She specifically raised concerns that the legislation does not address the legacy cash of cannabis businesses. She also discussed how credit card networks currently do not permit cannabis transactions and noted that some merchant acquirers are establishing fictitious names to process these transactions. She asserted that money laundering is thus occurring within the cannabis space and raised concerns that this money laundering could damage the industry’s standards for regulatory compliance.
• Ranking Member Scott also asked Ms. Sullivan to recommend specific requirements for financial institutions to ensure that the institutions maintain appropriate risk controls and processes if they are to service cannabis businesses.
  • Ms. Sullivan remarked that financial institutions should maintain a strong and robust framework for servicing cannabis businesses. She stated that this framework should involve risk limits approved by a financial institution’s board of directors, appropriate deposit ratios, and source and organization documentation requirements for legacy cash. She noted that money laundering could still occur, even for cash within the traditional banking system. She explained that money laundering can occur if financial institutions fail to follow know your customer (KYC) requirements, do not understand the sources of their funds, and do not engage in continued due diligence and transaction monitoring for cannabis-related transactions.
• Running Member Scott then asked Dr. Sabet to discuss the impact that synthetic cannabis has on the human brain. He also asked Dr. Sabet to address how the SAFE Banking Act of 2023 could result in more fentanyl coming into the U.S. through cartels.
  • Dr. Sabet noted how THC is the active ingredient in cannabis. He explained that THC acts on receptors in the human brain and throughout the human body that regulate various activities, including coordination, reward, and memory. He commented that cannabis’s impact on the human body’s receptors can make it addictive and noted how one-third of cannabis users have a cannabis addiction. He discussed how the human brain is developing through age 30 and stated that cannabis use can impact a person’s brain development. He noted how researchers can now genetically breed cannabis to increase its THC potency and commented that current THC potency levels in cannabis would have previously been unimaginable. He stated that the legal cannabis industry is driving these increases in cannabis potency. He also alleged that the legal cannabis industry is creating kid-friendly cannabis products, including gummy bears, candies, and concentrates. He then expressed concerns regarding the ability of cartels and transnational criminal groups to take advantage of the U.S.’s legal cannabis system. He noted how illegal cannabis markets have grown in states where cannabis is legal. He stated that legalized cannabis is driving up cannabis demand and that bad actors are satisfying this increased demand through offering cheaper and unregulated products. He recommended that the U.S. recommence an anti-drug media campaign targeted toward children so that children can understand the true health consequences of cannabis.

Full Committee Chairman Sherrod Brown (D-OH):

• Chairman Brown first asked Dr. Sabet to indicate whether SAM still supports removing criminal penalties for cannabis possession.
  • Dr. Sabet answered affirmatively.
• Chairman Brown then remarked that workers and small businesses should have access to financial services and that small banks and credit unions should provide these financial services in an equitable and affordable manner. He expressed concerns that large companies and financial firms will dominate the cannabis industry. He asked Mr. Oyefeso to indicate whether he shares this concern. He also asked Mr. Oyefeso to explain why a fair and competitive cannabis market will benefit workers and small businesses.
  • Mr. Oyefeso indicated that he did share Chairman Brown’s concerns that large companies and financial firms will dominate the cannabis industry. He remarked that a competitive cannabis market would allow for wages to grow. He warned that a consolidated cannabis market would enable a small number of companies to dictate wages, salaries, and benefits for workers, as well as consumer cannabis prices. He stated that passing the SAFE Banking Act of 2023 would enable more companies to enter the legal cannabis space, which would in turn empower workers to better negotiate their wage and benefit packages.
• Chairman Brown then asked Mr. Oyefeso to discuss the barriers that employees at legal cannabis businesses face when attempting to purchase homes. He also asked Mr. Oyefeso to discuss how the SAFE Banking Act of 2023 would impact these employees.
  • Mr. Oyefeso noted how cannabis employees are often paid in cash, which makes them vulnerable to robberies and causes them to not have proof of employment. He stated that this lack of proof of employment makes it difficult for these employees to apply for home loans and to rent apartments. He commented that this dynamic can make social mobility more difficult for these employees, even though they work within a legal industry. He then acknowledged that while there do exist between 700 and 800 U.S. financial institutions that service cannabis businesses, he asserted that this amount is “miniscule” relative to the overall size of the U.S. cannabis market.
• Chairman Brown then asked Ms. Packer to discuss the challenges that cannabis regulators face with regard to banking and small businesses.
  • Ms. Packer recounted how she had faced challenges creating a small business assistance program for cannabis businesses at the City of Los Angeles Department of Cannabis Regulation. She also stated that the “abnormal” banking environment for cannabis businesses made it difficult for governments to collect taxes and fees from these businesses and enforce various regulatory requirements. She mentioned how the City of Los Angeles had needed to establish a special cannabis cash collection unit at city hall to address the cash intensive nature of the cannabis industry. She noted that cannabis businesses had needed to make their payments in person and commented that this arrangement was burdensome to both cannabis businesses and the city. She indicated that the City of Los Angeles had accepted over $26.3 million in cash in fiscal year (FY) 2022.
• Chairman Brown then asked Ms. Packer to discuss how community-based institutions (including MDIs and CDFIs) promote fairness in cannabis banking and the broader cannabis industry.
  • Ms. Packer expressed appreciation for Congress’s inclusion of MDIs and CDFIs in the SAFE Banking Act of 2023. She called it critical for these financial institutions to have access to the legislation’s safe harbor provision and noted how these financial institutions regularly provide financial services to minority and socially vulnerable communities. She further commented that these financial institutions are serving the communities most harmed by the federal War on Drugs.

Sen. Steve Daines (R-MT):

• Sen. Daines first thanked Rep. David Joyce (R-OH) for his leadership efforts on the SAFE Banking Act of 2023 in the U.S. House of Representatives. He then discussed how the cash intensive nature of the cannabis industry makes workers vulnerable to robberies and other dangers. He asked Mr. Oyefeso to indicate whether this situation for cannabis industry employees and the public is becoming safer or more dangerous.
  • Mr. Oyefeso remarked that cannabis industry employees are facing more dangers. He explained that the growing popularity of cannabis retail stores has led criminals to focus on the stores (because these stores have many people carrying large amounts of cash). He stated that employees at cannabis retail stores without security teams are especially vulnerable to robberies. He also discussed how many cannabis employees are paid in cash and noted how former employees with knowledge of a business’s pay schedule might target current employees for robbery. He further highlighted how many of these employees are pharmacists that can make $68 per hour, which means that they can have very large amounts of cash on their person during pay periods.
• Sen. Daines also noted how cannabis businesses often must pay other businesses (such as plumbers and electricians) in cash, which could make these other businesses vulnerable to robberies. He then mentioned how 22 states have legalized the medical use of cannabis over the previous decade and indicated that 20 of these states (including his state of Montana) have also legalized the recreational use of cannabis. He highlighted how cannabis use is decriminalized in some form in 47 states and the District of Columbia. He noted that while he had personally voted against Montana’s referendum to legalize recreational cannabis, he stated that he must recognize the current political and legal realities in dealing with cannabis. He remarked that the current policy framework for cannabis does not work for banks, businesses, and law enforcement. He asked Dr. Sabet to indicate whether any state that has legalized cannabis (either for medicinal or recreational purposes) has taken any actions to recriminalize it.
  • Dr. Sabet mentioned how Alaska had decriminalized cannabis during the 1990s and then quickly recriminalized cannabis due to the negative effects of this decriminalization. He also noted how many states are now working to impose limits on permissible THC content in cannabis products. He stated however that the cannabis industry is significantly outspending cannabis legalization opponents on political and lobbying efforts.
• Sen. Daines interjected to ask Dr. Sabet to indicate the current legal status of cannabis in Alaska.
  • Dr. Sabet noted that Alaska has legalized cannabis since the 1990s and attributed this legalization to an expensive political campaign from cannabis legalization proponents. He also highlighted how most localities in the states that have legalized cannabis have outright banned the sale of cannabis.
• Sen. Daines then noted how Dr. Sabet’s testimony cites a Bloomberg article suggesting that cannabis businesses have widespread access to banking services. He stated however that only 9 percent of financial institutions offer access to banking services for cannabis businesses. He also noted how the aforementioned Bloomberg article indicates that the number of financial institutions servicing cannabis businesses might be overstated because this amount includes financial institutions that have only temporarily worked with cannabis businesses. He asked Dr. Sabet to indicate whether he has any additional data that suggests that cannabis businesses have easy and widespread access to financial services. He commented that cannabis businesses and financial institutions often complain about the difficulties that cannabis businesses face when seeking to access banking services. 
  • Dr. Sabet remarked that the U.S. Department of the Treasury and statements from state regulators indicate that cannabis businesses have easy and widespread access to financial services.

Sen. Catherine Cortez Masto (D-NV):

• Sen. Cortez Masto expressed interest in working to pass the SAFE Banking Act of 2023. She noted how this legislation would allow for cannabis businesses to fully access banking services within the U.S. She stated that legitimate Nevada cannabis businesses currently face logistical and safety challenges because of barriers to banking services. She noted how banks already accept the money from the contractors and servicers that legitimate cannabis businesses pay and asserted that banks ought to directly service cannabis businesses. She remarked that the SAFE Banking Act of 2023 has bipartisan support and noted how the U.S. House of Representatives has previously passed versions of this legislation on seven different occasions. She added the 38 state and territory attorneys general have called on Congress to pass this legislation. She mentioned how her state of Nevada had nearly $700 million in total legal cannabis sales in 2022. She asked Mr. Oyefeso to discuss the consequences faced by cannabis business owners and operators for operating all cash businesses.
  • Mr. Oyefeso discussed how cannabis business owners and operators are in constant fear for their physical safety because they must hold cash and physically deposit the cash for their businesses. He added that the cash intensive nature of the cannabis industry has become common knowledge, which makes cannabis business owners and operators more vulnerable to robberies. He further discussed how some states permit cannabis delivery and noted how these cannabis delivery workers must carry cash. He commented that this situation makes these delivery workers vulnerable to robberies.
• Sen. Cortez Masto highlighted how Nevada has the second highest cannabis sales per capita of any state and mentioned how safety is a top concern for the state’s legitimate cannabis businesses. She also noted how security is a top expenditure for these cannabis businesses. She then asked Ms. Packer to discuss the long-term consequences of not passing the SAFE Banking Act of 2023 for cannabis businesses and workers.
  • Ms. Packer noted how many cannabis businesses have stated that they cannot continue to afford the high fees for banking services. She expressed support for fair access to banking services for all cannabis businesses and employees. She also called for regulators to treat cannabis businesses the same as normal businesses and expressed concerns that cannabis businesses might still carry a stigma moving forward.
• Sen. Cortez Masto then noted how many cannabis business owners, parents, and members of local law enforcement agencies have expressed concerns over the proliferation of the cannabis “gray market.” She commented that this market had emerged in response to the higher costs that consumers pay for legal cannabis, which she attributed to high fees and security expenses. She asked Ms. Packer to define the cannabis “gray market.”
  • Ms. Packer remarked that the proliferation of the cannabis “gray market” creates safety concerns. She defined “gray market” businesses as those that are unlicensed and unregulated. She stated that these businesses will likely continue to operate in cash. She also recounted how many of the illegal Los Angeles cannabis businesses had sought to rob the city’s legal cannabis businesses.

Sen. Elizabeth Warren (D-MA):

• Sen. Warren called the SAFE Banking Act of 2023 a “long overdue step” to help legal cannabis businesses across the U.S. to open bank accounts, accept credit cards, and access other basic banking services. She commented that these services would enable businesses to operate safely and successfully and would protect workers from the risks associated with working in cash-only businesses. She further asserted that Congress must work to decriminalize cannabis at the federal level. She stated that cannabis’s current status as a Schedule I drug under the Controlled Substances Act might make many banks unwilling to service cannabis-related businesses, even with the passage of the SAFE Banking Act of 2023. She mentioned how she had pushed the Biden administration to use its legal authority to deschedule cannabis. She noted how the White House has directed the U.S. Department of Health and Human Services (HHS) and the DoJ to review how cannabis is scheduled and commented that this scheduling will impact future cannabis research. She asked Ms. Packer to indicate whether fully decriminalizing cannabis at the federal level would help to ensure that small businesses can obtain full access to safe and formal financial services.
  • Ms. Packer first thanked Sen. Warren for pushing the Biden administration to take further action on cannabis. She then remarked that fully decriminalizing cannabis at the federal level would help to ensure that small businesses can obtain full access to safe and formal financial services. She stated that many financial institutions will continue to view the cannabis industry as risky because of cannabis’s Schedule I status under the Controlled Substances Act, regardless of whether the SAFE Banking Act of 2023 becomes law. She also stated that moving cannabis to Schedule V under the Controlled Substances Act would still lead cannabis businesses and employees to be considered criminals under federal law. She asserted that the only way to eliminate this criminal status is to completely remove cannabis from Controlled Substances Act scheduling. She emphasized that the U.S. ought to deschedule cannabis rather than reschedule cannabis.
• Sen. Warren remarked that descheduling cannabis under the Controlled Substances Act would help ensure that small cannabis businesses have access to safe and formal financial services. She then stated that passing the SAFE Banking Act of 2023 would not address the thousands of people currently being incarcerated for cannabis-related activities. He contended that the U.S. ought to pursue the full decriminalization of cannabis. She also stated that the U.S. should ensure that updates to its banking laws include equity considerations. She discussed how banks use FinCEN’s 2014 guidance when considering whether to serve a cannabis business. She noted how this guidance calls on banks to consider whether a business’s owner has a drug-related conviction (which could include a cannabis purchase conviction) when deciding whether to serve the business. She also noted how African Americans are more likely than White Americans to be arrested for cannabis possession. She asked Ms. Packer to indicate whether updating FinCEN’s guidance so that cannabis convictions are no longer considered a disqualifying factor for potential depositors seeking banking services would lead to a more equitable banking system.
  • Ms. Packer answered affirmatively. She remarked that the U.S. cannabis landscape has changed significantly since 2014 and noted how 25 states have passed laws to expunge cannabis convictions. She added that 15 states have laws that affirmatively permit people with cannabis convictions to participate in the legal cannabis market. She stated that failing to update FinCEN’s guidance would thus undermine the ability of states to pursue their own cannabis policies.
• Sen. Warren highlighted how the SAFE Banking Act of 2023 would require FinCEN to update its 2014 guidance. She asserted that FinCEN should permit people with previous cannabis convictions to access banking services as part of its update to its 2014 guidance. She remarked that the U.S. must take a comprehensive approach to cannabis reform, which would include the SAFE Banking Act of 2023, cannabis decriminalization, and the pardoning and expungement of criminal records. She commented that these policies are necessary for addressing decades of “harmful and racially discriminatory” cannabis laws.

Sen. John Fetterman (D-PA):

• Sen. Fetterman noted how Canada has now legalized cannabis. He asked Dr. Sabet to confirm that Canada’s legalization of cannabis has not caused the country to descend into anarchy.
  • Dr. Sabet remarked that Canada’s legalization of cannabis has not caused the country to descend into anarchy. He stated that Canada’s legalization of cannabis has resulted in some increases in cannabis use and some issues with cannabis-impaired driving. He also mentioned how Canadian doctor’s groups have called for more awareness regarding high potency THC in response to emergency room admissions.
• Sen. Fetterman interjected to emphasize that Canada has not descended into anarchy following its legalization of cannabis. He then commented that opposition to cannabis legalization often stems from concerns regarding cannabis’s health dangers. He asked Dr. Sabet to indicate how many annual deaths are attributable to alcohol use.
  • Dr. Sabet indicated that alcohol use is responsible for about 120,000 annual deaths.
• Sen. Fetterman asked Dr. Sabet to indicate how many annual deaths are attributable to cigarette use.
  • Dr. Sabet indicated that cigarette use is responsible for about 400,000 annual deaths. He stated that legal drugs tend to kill more people than illegal drugs because they are supported by a for-profit legal industry.
• Sen. Fetterman asked Dr. Sabet to indicate whether the U.S. should make alcohol and tobacco illegal.
  • Dr. Sabet commented that alcohol and tobacco would likely remain legal given their prevalence in American culture.
• Sen. Fetterman then asked Dr. Sabet to indicate how many people have died from aspirin use.
  • Dr. Sabet estimated that a few thousand people every year die from aspirin.
• Sen. Fetterman asked Dr. Sabet to indicate how many people have overdosed from THC.
  • Dr. Sabet noted how there exists a difference between overdoses and overdose deaths. He indicated that there are likely hundreds of thousands of THC overdoses and that these overdoses do not necessarily result in death. He also highlighted how tobacco does not lead to overdose deaths.
• Sen. Fetterman interjected to emphasize that there have been no THC overdose deaths. He also noted how people can currently purchase grain alcohol (which has a very high alcohol content). He stated however that people do not inadvertently purchase grain alcohol because alcohol sales are well regulated. He expressed support for the SAFE Banking Act of 2023 and federal efforts to legalize cannabis. He further expressed support for efforts to provide pardons to people with cannabis convictions.
  • Dr. Sabet expressed support for efforts to provide pardons to people with cannabis convictions and to expunge the criminal records of these people. He also expressed support for removing the criminal penalties for cannabis. He asserted however that the U.S. should distinguish between cannabis decriminalization and cannabis commercialization and legalization. He also remarked that the U.S. should further consider its drug policies in light of state policies to legalize new substances (such as psychedelics). He further stated that the U.S. must consider the health impact of high potency THC cannabis. He noted how this high potency THC cannabis is being associated with suicides, schizophrenia, psychosis, and car accidents. He stated that while the U.S. should not pursue an incarceration strategy for cannabis, he expressed concerns that an overly permissive attitude toward cannabis would be harmful.

Sen. Tina Smith (D-MN):

• Sen. Smith remarked that the federal prohibition on cannabis has contributed to mass incarceration and over policing, which has disproportionately harmed African American and Hispanic communities. She stated that the U.S. must correct its previous policies and expressed support for decriminalizing cannabis and expunging cannabis convictions. She noted how the most recent version of the SAFE Banking Act of 2023 explicitly protects CDFIs and MDIs. She asked Ms. Packer to discuss how these protections can help to expand opportunities for communities that have been disproportionately harmed by federal cannabis policies.
  • Ms. Packer noted how CDFIs and MDIs disproportionately lend to African American and Hispanic communities. She highlighted how CDFIs regularly lend to small businesses for agriculture and commercial real estate projects. She commented that the U.S. cannabis and hemp sector especially need financing for these types of projects.
• Sen. Smith then mentioned how her state of Minnesota is on the cusp of legalizing recreational cannabis and called this legalization an “exciting development.” She expressed concerns however that the state’s future cannabis businesses will be forced to “operate in the shadows” so long as state and federal laws are not aligned on cannabis issues. She asked Mr. Oyefeso to discuss how these conflicts between state and federal cannabis laws will impact legal cannabis businesses and their workers.
  • Mr. Oyefeso expressed concerns that a continuation of the status quo will undermine efforts to train cannabis workers, which could result in pregnant women being prescribed cannabis. He mentioned how his labor union had developed a training program for cannabis workers and stated that his labor union cannot expand this training program without the passage of the SAFE Banking Act of 2023.
• Sen. Smith also asked Ms. Packer to discuss how the current conflicts between state and federal cannabis laws impact cannabis consumers.
  • Ms. Packer remarked that the current conflicts between state and federal cannabis laws foster confusion among consumers and commented that consumers often face challenges distinguishing between licensed cannabis businesses and unlicensed cannabis businesses. She also raised concerns that the current cash-based nature of cannabis businesses forces consumers to carry cash, which makes them vulnerable to robberies.
• Sen. Smith then mentioned how the Agriculture Improvement Act of 2018 had legalized hemp cultivation for commercial users. She noted how hemp production had spiked following the law’s passage and had then declined. She attributed this decline in hemp production to banking access challenges. She asked Ms. Packer to indicate whether she had heard similar banking access concerns from hemp farmers. She also asked Ms. Packer to provide recommendations for how the Committee can support hemp growers.
  • Ms. Packer remarked that limited access to banking services is a persistent problem throughout the hemp supply chain that impacts cultivators, manufacturers, distributors, and retailers.