WASHINGTON -- Colorado U.S. Sen. Cory Gardner introduced an amendment Monday that would allow marijuana businesses to open bank accounts in their own names in states that have legalized the drug.
The proposal is controversial as some states have legalized recreational marijuana while it remains illegal under federal law. Ten states and the District of Columbia now allow at least limited recreational use of marijuana.
The banking industry has been reluctant to take on pot sellers as customers while a federal prohibition is in place. Gardner's proposed amendment to a prison- and sentencing-reform bill seeks to allow marijuana businesses authorized under state law a way to access banking services.
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The amendment also is intended to help pot businesses to grow by diversifying their investments. And Gardner argues that bank accounts also would reduce the criminal element in the marijuana industry.
In a statement Monday, Gardner referred to the 10th Amendment protection of states' powers not delegated to the federal government by the Constitution.
“While we are debating criminal justice reform, we need to address the threat of prosecution by the federal government for people in Colorado that are operating legal businesses under state law," the Colorado Republican said.
Gardner noted that that 47 states "now allow some form of legalized cannabis. This year Oklahoma, Utah, and Missouri changed their laws to join 30 other states that allow medical marijuana. Recent polls show around 65 percent of the country support legalization and 93 percent support medical marijuana. The people are speaking. The states are leading. It’s time for Congress to act to protect states’ rights. I call on my colleagues on both sides of the aisle to take up and pass this important amendment today."
"Advantages [of the amendment] include public safety and more transparency and accountability," a Gardner spokesman told Colorado Politics Monday. "The money would be able to be traced and accounted for instead of a purely cash business. That would help law enforcement ensure that the profits are going to legitimate, law abiding investors rather than cartels. It would also help us better understand the size of the market and confirm that all taxes are being paid. In addition, it normalizes payroll for employees and allows Colorado workers in the industry to be treated the same as any other employee."
The proposal would protect the rest of the business community, he said.
"This isn’t just about banks," the spokesman said. "Other businesses from accountants to contractors to real estate professionals to employment agencies worry about conducting business with a marijuana business because they could be prosecuted for money laundering or be subject to civil asset forfeiture under federal law. This legislation would put all of those other businesses that interact with the marijuana industry at ease."
Critics of proposals to legalize marijuana sales call them an irresponsible means of promoting drug abuse in the business world. Gardner takes a different approach.
"Allowing marijuana businesses to operate in the open and be held accountable makes everyone safer," the Gardner spokesman said. "We will have better enforcement of the industry because we can trace transactions and make sure nothing nefarious is taking place. The disconnect with federal law makes it harder for people of good faith to be in the industry. But we need them in the industry because they will be the front lines of ensuring that the regulations work."
Earlier this year, Denver-based Fourth Corner Credit Union won Federal Reserve Bank approval to serve marijuana legalization advocacy groups. But the Federal Reserve would not allow Fourth Corner Credit Union to serve businesses that sell marijuana.
Gardner’s amendment in the Senate would go further, granting the marijuana businesses access to both credit unions and federally-chartered banks.
Although retailers would be exempt from federal prosecution under the proposal, cannabis would remain a Schedule 1 drug under federal law.
The U.S. Drug Enforcement Administration defines Schedule 1 as drugs with no accepted medical use and a high potential for abuse. They include heroin and LSD.
Marijuana sales and the bank accounts for sellers still would be banned in states that have not legalized the drug for medical or recreational use.
The amendment has support from the Cannabis Trade Federation, an advocacy group for marijuana legalization and commercialization whose members include Colorado dispensary operator LivWell.
“The conflict in federal and state law is untenable and Congress must act,” Neal Levine, CEO of the Cannabis Trade Federation, told the pot-news website Marijuana Moment.
The proposed amendment mirrors the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act, which Gardner, a Republican, and Sen. Elizabeth Warren, D-Massachusetts, introduced as a stand-alone bill last summer. That bill said that federal laws could not override state marijuana laws, particularly on decisions of whether to prosecute persons who possess or sell the drug.
The bill had support from Colorado Democrats U.S. Sen. Michael Bennet and Governor-elect Jared Polis.
So far, Congress has taken no action on the STATES Act. Gardner now wants to attach its provisions to a criminal justice reform bill supported by congressional leaders and likely to be voted upon soon.
"We think it is appropriate to attach this bill to criminal justice reform as an amendment because while we are having the conversation about criminal justice reform at the federal level we also need to address the threat of prosecution by the federal government for people in Colorado that are operating legal businesses under state law," the Gardner spokesman said.
Some financial institutions are not waiting for Congress to act.
The U.S. Treasury Department’s Financial Crimes Enforcement Network recently reported that the number of banks serving marijuana-related businesses grew 20 percent by the end of September. They included 375 banks and 111 credit unions, regardless of whether marijuana remains illegal under federal law.