WASHINGTON–Lamenting there has been little progress made at the federal level since he last addressed the same group, NCUA Board Member Rodney Hood told a cannabis industry meeting it remains up to Congress to act, and that the compliance demands in serving pot companies has even driven one CU to stop accepting new business.
In remarks to the PBC Conference, which stands for payments, banking and compliance in the cannabis industry, Hood said his position remains the same as when he offered remarks in 2021, and he repeated his position there is an “urgent need to reform banking laws as they pertain to marijuana-related businesses.”
“It is essential that Congress take legislative action to clarify and harmonize the laws and regulations surrounding the state-legal cannabis industry and marijuana-related businesses, so the industry can take part in the legitimate financial services industry,” he said.
Hood said there has been little progress on the issue since he last addressed the group. Indeed, he cited a recent report noting Vermont State Employees Credit Union has stopped accepting new accounts from businesses in the cannabis industry, after reporting it had received a spike in applications from a large number of cannabis enterprises for accounts. VSECU expressed concern it does not have the compliance mechanisms in place to service so many new accounts, Hood said.
As if Things are ‘Moving Backward’
“Keep in mind, this is an institution that’s been providing financial services to cannabis businesses for some time, since Vermont legalized medical marijuana in Vermont almost two decades ago, in 2004,” Hood commented. “So, they’re pretty far ahead in having addressed a lot of the challenges that many other states are struggling with now, in terms of determining how to manage financial services for cannabis businesses.”
Given what’s happened in Vermont, Hood added it’s “almost as if things are actually moving backward.” Hood said he does not blame VSECU for its decision, saying that as cooperative-credit institutions, credit union leaders have to weigh risks carefully as a fiduciary responsibility to their member-owners.
“I share this anecdote from Vermont not to discourage you, but as a concrete reminder of how much work we still have to do,” Hood told the meeting. “And yet, with all that said, I’m still quite optimistic about the prospects for the future. Because the reality is that we are seeing momentum on this issue, even if it’s moving more slowly than the cannabis industry, the financial services industry, and financial regulators would like.”
Center of Debate
Hood said cannabis banking was an issue that even just a few years ago seemed marginal but it has now moved to the center of public debate and attention.
“Moreover, we’re seeing some extremely positive signs in the form of engagement from policymakers at every level. Last December, Treasury Secretary Janet Yellen told Congress that banking reform for marijuana-related businesses would allow for more efficient tax collection from this growing industry,” Hood said. “Over the last few months, both the U.S. Council of Mayors and the National Council of State Legislatures issued resolutions calling on Congress to address the marijuana banking issue. So, we’re seeing more policymakers stepping forward with a highly reasonable and pragmatic approach to the issue, on a bipartisan basis. Again, that’s a positive development.”
According to Hood, private sector solutions have also increased to address the gap in banking services for cannabis businesses, and there has been progress at the state level as well.
‘Making It Impossible’
“Here’s the fundamental thing I’ve been trying to get legislators to understand: this state of affairs is making it impossible for (regulators) to do our jobs,” Hood said. “If you’re in the legal cannabis business, it’s making it hard to plan for the future, both short- and long-term, particularly for the smaller players. If you’re in the financial services industry, it’s making it hard to conduct transactions with this legal, and growing industry. And if you’re like me, on the regulatory side of things, the lack of clarity is making it hard for us to tell you all what you need to be doing.
“Moreover, this state of affairs is making it impossible for this increasingly legal industry to thrive,” he continued. “Here we have a burgeoning legal industry—projected to generate some $32 billion in sales this year and to grow to more than $45 billion by 2025—that desperately needs access to capital and access to safe, affordable financial services. Instead, many players either have to conduct transactions in cash, which is both inconvenient and dangerous, or they have to pay a premium for services.”
Hood urged attendees to “keep doing what you’re doing.”