Hearing to Discuss Cannabis Industry's Banking Challenges

Next week, the U.S. Senate Committee on Banking, Housing and Urban Affairs will hear from U.S. Senators, Banking representatives, and Cannabis industry leaders to discuss the numerous banking challenges for the cannabis industry.

The witnesses scheduled to speak at the Hearing include United States Senators, Cory Gardner (of Colorado) and Jeff Merkley (of Oregon). Both Senators are also supporters of the “Secure and Fair Enforcement Banking Act” (“SAFE”), a banking bill that proposes to open up safe harbors to financial institutions working with cannabis businesses in states where cannabis is now legal. Additional witnesses scheduled to speak include, Chief Risk Officer of Maps Credit Union, Rachel Pross; President and Chief Executive Officer of Citywide Banks, Joanne Sherwood; Vice President of Government Affairs of Smart Approaches to Marijuana, Garth Van Meter; and Chief Executive Officer and Owner of LivWell Enlightened Health, John Lord.

Currently, thirty-three (33) states, the District of Columbia, and many U.S. territories have legalized marijuana to some degree, albeit medical or for adult-use. However, federal law still prohibits the possession and distribution of marijuana under the federal Controlled Substances Act (“CSA”).

Financial institutions are subject to federal laws and regulations including potential civil and criminal liabilities under the CSA, anti-money-laundering statutes, the Banking Secrecy Act, and the Patriot Act. Due to the significant risks involved, many financial institutions have been wary in dealing with marijuana businesses, even in states that have legalized marijuana. These challenges continue to force marijuana businesses into a “legal gray area” of dealing in cash-only transactions, and transporting and storing large amounts of currency.

In the last couple of months, state banking supervisors, the state bankers associations, and even the National Association of Attorneys General have all called on Congress to take action now to advance federal legislation to allow financial institutions to serve the needs of their local communities.

“Leaving the cannabis industry unbanked presents serious public safety, revenue administration, and legal compliance concerns and must be remedied immediately,” a May 2019 Letter from the 50 state bankers associations reads. “Although we do not take a position on the legalization of marijuana, our members are committed to serving the financial needs of their communities – including those that have voted to legalize cannabis. We believe federal action is necessary and support a solution that would allow banks to serve cannabis-related businesses in states where the activity is legal.”

Next week’s Senate Committee Hearing comes just over a week after the U.S. House of Representative’s Subcommittee held the first-ever hearing on the need to reform our nation’s marijuana laws.

The Senate Committee Hearing entitled, “Challenges for Cannabis and Banking: Outside Perspectives” is scheduled for Tuesday, July 25, 2019 at 10 a.m.

Another Unlicensed Enforcement: Is it Worth the Risk?

Months ago, we reported on recent enforcements on two unlicensed cannabis businesses in Sacramento and Costa Mesa. Now, we have learned of another enforcement action against an unlicensed cannabis retailer operator in Los Angeles.

On October 25, 2018, the Bureau of Cannabis Control (Bureau) and the Department of Consumer Affairs’ Division of Investigation-Cannabis Enforcement Unit (DOI-CEU), in coordination with the Los Angeles Police Department (LAPD) served a search warrant on an unlicensed cannabis retail location. The City of Los Angeles confirmed that the location had not applied for a local license. As a result of the search warrant, over $2,000,000 of cannabis and cannabis products were seized, including nearly 500 pounds of cannabis flower, over 430 gross pounds of concentrates, and over 200 gross pounds of edibles.

Not only do unlicensed businesses need to worry about the seizure of product, but they also need to be concerned with criminal charges. The owner of the retail location, as well as six employees, were all arrested on misdemeanor charges for operating a commercial cannabis business without a license. This particular investigation was conducted at the request of the Bureau based upon a complaint received.

As we are coming to the end of the first year of legalization and licensing, unlicensed cannabis businesses are going to have fewer excuses to provide the Bureau, and the District Attorney's Office, if they find themselves under investigation.

BOTTOM LINE: If you don't have your license yet, start the process now. If you don't know what you need to do, seek legal advice and assistance. It's just not worth the risk.

Navigating Real Estate Waters in a Cannabis World

With the legalization of cannabis in California, cannabis businesses will need to address their real estate needs.  As not many businesses can afford to buy a building outright, leases will need to be negotiated and executed. However, cannabis related real estate leases will need to be handled more carefully than a normal commercial lease.

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Landlords and Medical Marijuana in California

In 1966, California voters decriminalized the medical use of marijuana by approving the California Compassionate Use Act. In 2015, the voters approved the Medical Cannabis Regulation and Safety Act ("MCRSA"), to regulate the medical marijuana industry. In 2016, California voters approved the Adult Use of Marijuana Act ("AUMA"), allowing (1) individual adults to possess, use, purchase, transport, or give away up to 28.5 grams of marijuana or 8 grams of concentrated marijuana; (2) them to grow up to 6 plants and possess the marijuana produced by the plants; and, (3) legally possess marijuana accessories.

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Medical Marijuana and the Workplace

California’s Compassionate Use Act (CUA) of 1996 decriminalized the use of marijuana for medicinal purposes. However, it did not legalize marijuana. It only shields medical users and caregivers from criminal liability. Recently, Governor Brown signed into law three bills (Assembly Bill 266, Assembly Bill 243, and Senate Bill 643) that comprise the California Medical Marijuana Regulation and Safety Act (MMRSA). While the MMRSA deals with various medical marijuana regulations, it does nothing to impede an employer’s right to maintain a drug free workplace.

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