Vermont Attorney General TJ Donovan joined 21 other attorneys general Monday in signing a letter urging Congress to pass a bill allowing legal cannabis businesses to access banking systems.
The Strengthening the Tenth Amendment Through Entrusting States (or STATES) Act would allow states that have legalized cannabis to create their own laws and regulatory structures, doing away with the conflict between state and federal rules.
Under current federal banking laws, because marijuana is considered an illegal drug, cannabis businesses are forced to operate primarily in cash. Over the past five years, 33 states have developed legalized markets in some form.
Donovan say lack of access to the banking system is creating too much risk for the emerging multi-billion dollar industry.
“We need to create a regulated market for cannabis in Vermont — banking is a major component of regulation,” Donovan said in a statement. “Action on this issue is long overdue. Passage of the STATES Act will empower Vermont entrepreneurs to engage in a transparent, regulated business and will allow the State to ensure consumer protection.”
The bill was introduced by Sens. Cory Gardner, R-Colo., and Elizabeth Warren, D-Mass., in 2018. President Donald Trump said last year he “probably will end up supporting” the legislation.
Recreational use and cultivation of marijuana is legal in Vermont, however efforts to create a legal market for the drug have faltered.
Vermont’s Legislature has for years considered a bill creating taxed and regulated industry, most recently in 2019, however it is yet to overcome disagreement among lawmakers in the House and resistance from Gov. Phil Scott. The Senate has repeatedly passed different versions of the bill. Supporters are planning another push for full legalization this coming session.
But despite the halting progress on creating a commercial market in Vermont, and the federal rules, some Vermont banks are already dabbling in the cannabis industry.
Brattleboro Savings and Loan is the only Vermont bank so far to jump into the market. The bank already loans money to CBD companies, which sell products derived from hemp, and is taking steps to become the first to lend to the full range of cannabis-associated companies, including recreational marijuana.
Chris D’Elia, the president of the Vermont Bankers Association, said he knows of at least two other banks that may follow suit.
D’Elia said the passage of the federal STATES Act would make it easier for those banks to provide services to marijuana businesses. He hopes the bill gets overwhelming support in the U.S. House and sends a signal to the Republican-controlled Senate that the bill should move forward.
The Vermont State Employees Credit Union, which is a state-chartered lending institution, as opposed to a federally chartered bank, was the first financial institution in Vermont to wade into the cannabis industry.
VSECU spokesperson Rachel Feldman said because of its local charter the credit union isn’t quite as vulnerable in terms of the federal laws. But since VSECU is still lending to everyone from medical marijuana dispensaries to hemp and CBD businesses, she said there’s still a risk that the federal government could decide to prosecute or sanction lending under current federal law.
“There is no protection to stop a financial institution from being penalized for serving these sectors,” Feldman said.
“It’s our belief as a credit union that any business operating legally under Vermont state law has a right to financial services,” said VSECU spokesperson Rachel Feldman. “So it’s not really about being supportive of legalization of cannabis, it’s about a business that’s operating legally should have a right to conduct their banking services legally as well.”
Greg Huysman, VSECU’s director of business lending and services, said passing the federal act would also just give financial institutions more guidance.
“It would mitigate the risk that’s currently on the federal side and just make our job easier,” Huysman said. “We’ve been waiting for a law like this for a long time.”
The letter signed by Donovan said the current system is “a confusing and dangerous regulatory limbo” that leaves individual states’ cannabis industries unclear about what they are and aren’t allowed to do.
It argues that the restrictions “imperil” states’ rights, and present serious regulatory and public safety threats, since cash-intensive businesses are often targets for criminal activity, and can make it difficult to track revenues for taxation and regulatory compliance.
“This will reduce the industry’s reliance on cash, bring greater clarity to the industry, prevent crime by limiting opportunities for potentially violent robberies and thefts, and ensure that each state has the freedom to determine policy in this area,” it says.
