Attempt to help states ease banking for marijuana businesses stumbles in Congress

The annual Defense Department policy bill members of Congress released last week did not include measures to loosen federal marijuana restrictions, to the disappointment of advocates.

That leaves few avenues to pass marijuana measures seen as boons to states where the drug is legal before Congress adjourns for the year.

As one of the last must-pass bills Congress would consider while Democrats still control both chambers, the defense bill was a potential target for advocates of legalizing marijuana to attach two bills.

One would clarify that banks lending to legitimate marijuana businesses in states with legal markets are not in violation of federal law. The other would provide federal funding to help states expunge criminal records of people convicted of offenses before the substance was made state-legal.

Though the bulk of the defense bill deals with authorizing Pentagon programs, it is often filled with additional policy measures.

But when 4,400 pages of text for the 2022 bill were released last week, neither marijuana proposal was included.

With so little time left in the session, the path to passage is now either as part of a year-end spending bill –— another popular target for legislation — or on its own, Morgan Fox, the political director for the cannabis advocacy group National Organization for the Reform of Marijuana Laws, said in an interview.

“I’m glad that we still have other options,” Fox said Wednesday. “It’s pretty disappointing.”

A vote on a standalone marijuana bill is unlikely, with the Senate in session only a handful of days this year and a list of priorities remaining, including the year-long government funding bill and a measure to clarify election laws.

Split with states

Though the federal government places marijuana on its list of the most restricted controlled substances, 21 states have legalized recreational use.

That policy split leads to unique challenges for state-legal businesses in areas like banking, where some financial institutions refuse to work with the marijuana industry out of fear they would violate federal law.

The banking bill, introduced by U.S. Rep. Ed Perlmutter, a Colorado Democrat retiring at the end of the year, would clarify that federal regulators could not penalize banks for doing business with marijuana retailers in compliance with their states’ laws.

The banking bill has passed the House seven times since its first introduction in 2019, but the Senate has never passed it.

The streak in the House may be in danger as Republicans take over next year. Despite its bipartisan support and a 321-101 vote in favor last year, the legislation could face long odds next year if Ohio Republican Jim Jordan becomes the chairman of the House Judiciary Committee, as expected. Jordan has consistently voted against marijuana legalization efforts, including against the banking bill.

Senate Majority Leader Chuck Schumer, an advocate of liberalizing marijuana laws, told reporters before the defense bill’s text was released Tuesday he was working on getting the banking measure passed.

“It’s a priority for me,” Schumer said. “I’d like to get it done. We’ll try and discuss the best way to get it done.”

Senate Minority Leader Mitch McConnell, a Republican from Kentucky, opposed including marijuana provisions in the defense bill, listing the banking bill as an item that did not belong there.

“We’re talking about a grab bag of miscellaneous pet priorities — making our financial system more sympathetic to illegal drugs,” he said. “If Democrats wanted these controversial items so badly, they had two years to move them across the floor.”

Schumer resisted bringing the banking bill to the floor this Congress as he sought to instead pass a broader federal legalization measure he introduced with fellow Senate Democrats Cory Booker of New Jersey and Ron Wyden of Oregon.

“Although the SAFE Banking Act is common-sense policy that I support, it has to be coupled with strong restorative justice provisions that seek to right the many injustices experienced by Black and brown communities as part of our nation’s failed war on drugs,” Booker said in a statement last year.

A spokesman for Booker did not return a message seeking comment Wednesday.

Schumer’s advocacy would be crucial to passage, Fox said, though the deference to a more comprehensive bill may have hurt its chances this year.

“Having support of Senate leadership I think was really important,” Fox said. “I wish they’d gotten the ball rolling on this way earlier in the session, instead of waiting until after the (Schumer-Booker-Wyden bill) was introduced.”

While the more comprehensive measure stalled, advocates hoped packaging in a year-end bill the bipartisan banking measure with a bill to provide $20 million in grants to help states process expungements would suffice.