Senate Bill 930, introduced by Sen. Bob Hertzberg, (D-Van Nuys), passed the Senate on a 29-6 vote, and has now passed the second round of commenting phase with the Assembly. It is a bill that would allow financial institutions to offer limited banking services to the state’s legal cannabis businesses, and as of June 26th it has passed the Assembly Business and Professions Committee. The bill is now on it’s way to The Assembly Appropriations Committee for yet another round.
The bill comes as a ray of hope for cannabis dispensaries, manufacturers and even ancillary businesses that have been waiting for the opportunity for legitimate cannabis banking. We have heard countless stories of bank accounts, credit cards, even mortgages getting pulled and closed for being related to the cannabis industry.
Under SB 930, California would allow for the creation of limited-charter licenses for banks and credit unions overseen by the Department of Business Oversight, the state’s financial regulator. This special-charter institution model would allow checks to be issued that could be used to pay state or local fees and taxes, rent or cost of goods including cannabis goods, or to buy state or local bonds or warrants.
The bill was co-sponsored by Board of Equalization member Fiona Ma.
“California can’t wait to take action. With secure banking for cannabis through SB 930, the industry will benefit, the state will get a revenue boost and pot cash will get off our streets,” she said in a news release.
Multiple docu-series that aired on CNN and MSNBC chronicled what Colorado dispensaries and growers were going through attempting to bank prior to their state chartered banking system. They documented how washing cash and spraying it with Febreze so it didn’t smell like weed in order to deposit it. Colorado’s state cannabis bank Safe Harbor created the model for California to follow. Other regulated cannabis states like Hawaii now use Safe Harbor in conjunction with CannaPay to operate cashless transactions.
Federal law forbids federally regulated and insured banks or credit unions from knowingly accepting cannabis money, excluding the $10 billion legal cannabis industry easy banking, easy accounting and painless payments.
“The status quo for our growing legal cannabis industry is unsustainable,” said Sen. Bob Hertzberg. “It’s not only impractical from an accounting perspective, but it also presents a tremendous public safety problem. This bill takes a limited approach to provide all parties with a safe and reliable way to move forward on this urgent issue.”
State officials estimate they will collect $600 million in cannabis taxes in the upcoming year, raising a very real public safety issue, including the possibility of theft, as business owners carry duffel bags stuffed with cash to state offices. The use of cash also makes it hard for the state to account for and audit transactions, not to mention the California Department of Fee and Taxation are not able to take cash payments above $20,000.
“The question becomes, ‘With that amount of cash, what do you do?’ — because you can’t deposit in a bank,” Sen. Bob Hertzberg said during a legislative hearing. “We are faced with a significant public safety challenge.”
The measure was also backed by Lindsay Robinson, Executive Director of the California Cannabis Industry Association (CCIA). Robinson told lawmakers a CCIA member has an $800,000 tax bill due next month and plans to pay it in cash.
“The threat of violence and theft is extremely real for our members,” Robinson said.
Hertzberg has proposed an advisory board that includes the state treasurer, controller and chief of the state Bureau of Cannabis Control. The legislation would also allow banks to be privately insured in lieu of the FDIC.
All of the proposals proposing change to state banking to allow for cannabis businesses to bank were under threat U.S. Atty. Gen. Jeff Sessions that his office would begin enforcing federal laws against marijuana in states where voters had acted to make it legal.
Hertzberg’s spokesperson Katie Hanzlik has said that, “Because SB 930 is a bill that could have a financial impact, it most likely will not be heard until after the Legislature’s summer recess in August.”
President Trump personally directed a retreat from that position after discussions with Republican Sen. Cory Gardner of Colorado, a state that has successful state chartered banking, regulatory structure and taxation. Hopefully California’s Assembly members will agree with the Senate so it becomes law.
B. Le Grand