The ninth time's a charm for cannabis banking reform
Plus, Hochul's new budget has teeth, the chicken wing/roach problem, and more.
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💡What’s the big deal?
What happened: A bipartisan group of lawmakers last week reintroduced the Secure and Fair Enforcement (SAFE) Banking Act, which would allow cannabis companies to access the banking system much like any other industry.
Why it matters: Federally-charted banks and credit unions can theoretically face prosecution by working with cannabis companies because cannabis is still considered a Schedule I drug under US federal law.
Banks that do choose to work with the industry also have to file what’s known as Special Activity Reports (SAR), which creates compliance headaches and narrows the pool of banks willing to take the risk in the first place.
This creates all sorts of obvious headaches for companies in the industry:
They’re dealing with piles of cash, and all the security risks that entails.
They’re paying their vendors and employees in cash — and yes, it’s an accounting nightmare.
They’re paying taxes in cash, and some states levy extra fines for doing so.1
They’re not able to list on major stock exchanges in the US, so are left to relatively illiquid exchanges like trading over-the-counter or on the Canadian Securities Exchange.
They’re largely not able to open a lines of credit or receive small business loans at non-usurious rates.
They’re mostly unable to raise money from traditional sources, so often have to deal with less-than-savory investors who are looking to make a quick buck, or tap public markets before they’re mature enough to do so.
This is, I believe, the ninth time a bipartisan group has tried to pass the SAFE Act. The ninth time might be a charm, or something, I don’t know I’m not holding my breath. But it’s at least a multiple of three, if you’re into those kinds of superstitions.
There may be something different in the air, however. Markets moved, and both the industry and cannabis-focused activists are coalescing around the bill.
🌿 Jer’s take
Cannabis legalization is quite popular in the US and banking reform is low-hanging fruit.
Frankly, it’s easy to get Republicans, even some of those that say the potent combination of joints and Call of Duty are more responsible for school shootings than guns, aboard.2
More access to banks for cannabis companies means more money for small businesses. That means more jobs created, more local economies stimulated, and ultimately, more tax revenue for everyone.
Sounds like a win-win, right?
Well, like anything in cannabis, it’s not so simple. Like any other issue, the debate over cannabis banking reform is a microcosm of the national conversation.
Many progressives love to hate SAFE Banking
For one, many progressives — and rightfully so, I’ll add — don’t love the optics of passing industry-friendly legislation ahead of straight up federally decriminalizing cannabis.
This has extended to most mainstream Democrats.
Their overarching desire is to filter all cannabis legislation through the lens of social justice: As in, does this particular piece of legislation help get people out of jail, expunge records, and stop frequent, volatile interactions between cops and innocent Black and Brown people?
More broadly, will this legislation attempt to fix the historic wrongs of the War on Drugs?
What some progressives especially love, and most Republicans especially hate, are bills that would expand federal bureaucracy and levy high taxes on cannabis businesses to achieve that goal.
Many Republicans, at least those that support legalization, are chiefly concerned with supporting small businesses and creating jobs. Dollars-and-cents, with a little dash of state’s rights.
So, therein lies the tension — Republicans want business-friendly legislation, and Democrats want broad reform. The two goals can certainly work together, but politics is politics.
Those bills includes wish-list pieces like community reinvestment funds, which would, as the name says, reinvest cannabis tax revenue into communities hit hard by the War on Drugs.
But those bills, based on the little I can glean from reporters far better-connected Capitol Hill than myself, have about the same chance of becoming law as I do running a sub-five minute mile. Won’t happen.
Death by a thousand cuts
Thus, we get back to the SAFE Act. Progressive Democrats have repeatedly tried to shoehorn social justice-focused pieces into the banking bill to make it more palatable to their constituents.
And that’s a nonstarter with most Republicans who would otherwise support it.
For every additional social equity stipulation, you lose a Republican vote, Congressional aides and lobbyists who’ve worked on this legislation told me. It’s tough to beat that math.
More mainstream Democrats, like one Chuck Schumer, have also outright blocked SAFE’s passage. And remember Cory Booker’s pledge to lay himself down?
These are the arguments on either side that have caused previous iterations of the SAFE Act to die by a thousand cuts, even though most lawmakers likely privately believe it’s a good idea to get banking reform passed quickly. The situation is untenable for cannabis businesses.
To be clear, I’m not solely blaming progressives for the repeated failures of the SAFE Act. But they are culpable for letting the perfect be the enemy of the good.
I’m also blaming Republicans who can’t see the valid arguments that progressives are making about who and what legalization is for, rather than focusing strictly on the money.
The last piece I’ll say here is that the whole project of legalization as a tool for economic development will continue to fail without proper banking access for the minority entrepreneurs that most progressives want cannabis reform to help.
The SAFE Act or similar legislation is critical to helping them start viable, sustainable businesses, and without it, it’s all just lip service.
SAFE is a compromise in the first place. It’s a far cry from legalization.
At the end of the day, I’d rather cannabis banking be a moot point, but that’s not how politics works.
If it were up to me, I’d like to see well-written, bipartisan legislation that removes cannabis from the list of federally controlled substances, or at least downgrades the schedule to something that makes logical sense and frees up banking access by osmosis.
From there, I’d hope the legislation would kick it to the states to decide how they want to regulate the industry, if they want a cannabis industry at all.
Let Oklahoma have low taxes and a free-for-all market, and let New York experiment with a progressive, justice-focused vision of legalization. America can be beautiful sometimes.
The problem is, legalization is far more popular among the American public than it is on Capitol Hill.
For what it’s worth, the same Senate Majority Leader that previously blocked the SAFE Act tweeted last week that he’ll push for social equity provisions to be included in the new version, but again, I’m not holding my breath.
I’ll believe it passes when I see it happen.
Ultimately we’ll probably get some sort of compromise that everyone hates, but hopefully works. Isn’t that the true promise of American democracy?
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🗣️ Quote of the week
“My whole world was just annihilated. She was my only child. I can never have another child. I’m not a mother anymore,” said Laura Bruneau, the mother of Lorna McMurrey, who collapsed and later died at a Trulieve-owned cannabis cultivation facility in Massachusetts last year.
This quote is from Dusty Christensen’s deeply reported look into the horrid conditions many cannabis industry workers are facing, co-published with Shoestring and The Nation.
🗽 Spotlight on New York
What happened: New York Gov. Kathy Hochul reached a deal on new laws that give the Office of Cannabis Management (OCM) and other departments much more enforcement power on illicit cannabis stores proliferating around New York City and the rest of the state.
The new rules come as part of the state’s 2024 budget.
Among the new powers:
The OCM will be able to levy fines of up to $20,000 a day on illicit cannabis stores.
The OCM and the Department of Taxation and Finance will be able to inspect inventory and shut down illicit cannabis shops.
Some illegal cannabis shops could be prosecuted for tax fraud.
Landlords will have more power to evict tenants who rent for the sole purpose of selling illicit cannabis.
Why it matters: Cannabis was legalized in New York over two years ago and there are still only a handful of legal stores operating.
Lax enforcement and the long gap between legalization and getting stores open in one of the largest cities in the world — with hundreds of thousands, if not millions of potential consumers — has led to illicit stores proliferating, as I’ve written before.
Illicit cannabis products, some experts say, may have inaccurate labeling on potency, and may contain excess levels of pesticides and other heavy metals which can hurt consumers.
Okay, but: Lawmakers are walking a tightrope.
They don’t want to re-criminalize cannabis, but they do want to give entrepreneurs — especially those impacted by the War on Drugs that the state is trying to give preferential opportunities to — a fighting chance against the illicit market.
If they can’t compete, the whole edifice that legal cannabis was built on in New York will crumble.
A return to Reefer Madness in New York?
I wanted to call attention to two stories that caught my eye recently, for, well, bad reasons.
Second, is this piece in the Associated Press about what a few vets say is a slight uptick in New York City dogs eating discarded roaches off the street — which, yes, is a poisoning hazard for our furry friends:
🌿 Jer’s take
I couldn’t stop myself from offering my take here, so I’m sorry.
This is something I’d usually yell at my friends about in the bar, but if you subscribe to Cultivated you’re all now my friends and you have to entertain my screeds.
Okay. I’ll address The Atlantic piece first.
Cannabis is among the least noxious of odors that you might encounter on a New York City street.
Do I admit that it’s sometimes problematic when people smoke pot in front of children on busy blocks, or, god forbid, in a moving subway car?
Of course! Exercise some judgment, people.
At the same time, most New Yorkers live in tiny apartments, and many buildings have rules against smoking. And perhaps more importantly, most New York City Housing Authority developments have outright bans on smoking and breaking those could jeopardize someone’s right to a home.
The street is where life happens in the city, and that means that’s where pot-smoking happens, too. Deal with it. If you want everything to smell like flowers, you should probably move to Beacon or elsewhere upstate. Maybe the city isn’t for you, and that’s fine!
There are far worse problems on New York City streets for our nostrils that should receive 2,000 words in a national publication, like trash and rats.
I smell a lot of terrible things day-to-day walking around my neighborhood. I still love it, and people are free to do as they please.
Harping on legal pot, of all things, is understandable because it’s new. But it also reveals a deeper stigma that people just don’t like the stuff, which is fine.
But the real reason you see these pieces written is that the authors, or at least the voices they elevate, are looking for ways to re-criminalize pot-smoking behavior and impose more rules to reign in those low-life stoners and send them back to the shadows from whence they came. That’s not fine.
They pay lip service to the idea that legalization is good, and then launch into monologues about unintended consequences — most of which aren’t objectively all that bad, if people getting high weren’t the root cause.
To reiterate, this isn’t a real issue of national importance. It’s a minor inconvenience for some people.
Do I smoke pot on the subway or in front of children? No. Of course not. But I see far worse behavior all the time. Everybody take a breath, it’s going to be okay.
All that being said, I’m sympathetic to the concerns about an uptick in smoking after we collectively have worked so hard to reduce harmful cigarette usage. My personal consumption preference isn’t smoking, and legalization has brought me so many safer alternatives.
But I also don’t feel the need to force my personal preferences on others.
The chicken wing/joint problem
Turning to the AP piece: Sure, it’s a problem that more dogs are getting sick from discarded roaches. But harping on this problem still, in my view, reveals a deeper stigma against cannabis rather than the revelation of an actual issue.
I agree, we should protect dogs. I love dogs. They’re fluffy and fun and they love to run, except for my parents’ dog, Chase. He prefers to sleep.
But most dog owners in the city will certainly tell you that discarded chicken bones are a much larger problem than joints.
Maybe we’ve gone too far legalizing take-out chicken wings. In Brooklyn, you can find chicken places on every other block. Maybe the pendulum should swing back a bit, now that everyone seems to be discarding their bones on the street.
Maybe I find the odors of buffalo sauce nauseating on the subway when I’m trying to run an errand.4
People should be free to eat chicken wings, just in the comfort of their own homes. Keep it out of sight, out of mind. We’ve worked hard to improve the diets of everyday Americans, so why are we now letting so many people crush chicken wings?
You see what I’m doing here? That’s how the AP’s and The Atlantic’s pieces sound.
Realistically, we’re not going to ban eating take-out chicken wings in New York. And we shouldn’t, even if that means dog owners need to be extra careful. Just like we’re not going to tell people they can’t smoke pot on the sidewalk. Good luck enforcing that.
It’s a city. It’s New York. It’s messy, inconvenient, not always healthy, but quite wonderful at the same time.
Deal with it.
Check out the OCM’s guide to safe cannabis consumption here. It’s refreshing to see such factual, grounded information about using cannabis from a state agency. Bonus points that they know what the term “quap” means.
📉 Market moves
What happened: Chicago area workers at Green Thumb Industries’ chain of Rise dispensaries ended their 13-day strike. The company offered workers up to 50% wage increases to come back to work, MJBizDaily reports.
I guess striking works, sometimes.
Why it matters: Expect labor and unionization to become much bigger stories in cannabis in the coming weeks and months, especially as more reporting sheds light on working conditions in the industry.5
Other stuff happens:
Curaleaf reported fourth quarter and full-year results. The company lost $370 million in fiscal year ‘22. Ouch.
Acreage Holdings also reported fourth quarter and full-year results. The company lost $95 million in Q4.
Cantor Fitzgerald discontinued its cannabis industry coverage. Former analyst Pablo Zuanic is launching his own boutique research service covering cannabis and psychedelics, according to his LinkedIn page.
🗞️ News you can use
🧑⚖️ Legal matters
In the weirdest press release I’ve ever seen in nearly a decade of journalism, the licensee that’s suing Cookies Cannabis dropped the suit and walked back the salacious claims in the filing. What?
Read the press release for yourself. I have no idea what’s happening here.
Chris Roberts of MJBizDaily has a good breakdown on the situation. Predictably, few people could be reached for comment.
Oregon’s Secretary of State, Shemia Fagan, resigned this week over a $10,000 per month consulting contract she signed with a cannabis company owned by her political donors, reports CNN.
Her office also oversees audits of cannabis companies in Oregon. Oh.
📜 Policy moves
What happened: Legalization is inching closer to reality in Minnesota. A bipartisan group of lawmakers in both houses will negotiate a final bill that will be sent to the governor, Marijuana Moment reports.
Okay, keep going: If you want some “entertainment,” check out this thread of Minnesota Republicans getting up in front of the entire legislature to profess their ignorance about anything to do with cannabis.
One Republican suggested the legal limit of up to an ounce is enough for three joints. Either that guy has never seen weed in his life, or he really, really, really loves huge joints. C’mon.
I’ll underscore: Cannabis policy is complex and important to get right. These fact-free debates do not help set the groundwork for effective legislation.
🧪 Science & research
What happened: New research published in the journal Addictive Behaviors sought to understand the relationship between high-potency cannabis use and mental health.
The researchers found that the evidence is mixed. They found no association between high potency cannabis — measured by THC concentration — and psychosis-like symptoms, much to Alex Berenson’s chagrin.
Why it matters: Cannabis use and the risk of psychosis and violent crime is one of the key talking points that anti-legalization activists use. And based on the research, that’s a relatively fact-free talking point, so far.
But we do need more research into how THC concentrations in cannabis products can impact mental health, and whether regulations like potency limits can mitigate that.
The jury’s still out.
📚 What I’m reading
The future of ketamine therapy (Axios)