Three weeks after U.S. Attorney General Jeff Sessions rescinded the Cole Memo, the cannabis industry has suffered financial setback while gaining Congressional support. It’s been a double-edged sword.
The move by Sessions to throw out Obama-era marijuana policy, which protected the substance in a legislative murky area, was meant to empower federal prosecutors to crackdown on cannabis — should they believe it legally necessary. Risk involved with legal-pot businesses has never been higher. But it’s also highlighted the bipartisan support that exists for cannabis on Capitol Hill.
This threat of federal involvement has understandably stoked fear among financial institutions. Providing banking services for cannabis businesses was already questionable under the Cole Memo, which basically asked federal prosecutors to remain hands off. Now that those prosecutors have clear federal permission to attack pot, the banking industry has become much more hesitant to accept cannabis dollars.
Who can blame them? The risk in handling finances for cannabis companies has increased greatly.
Compounding matters was that this setback came just days after recreational cannabis officially became legal in California. At a time when a wave of new money was about to enter the world’s largest legal marijuana market, banks and investors received a clear message from the U.S. government to stay out.
It’s unlikely that banks will turn away existing customers with cannabis ties. But new businesses will probably have a harder time securing financial services.
No doubt, it’s a bad blow for the cannabis industry. But there are other ways for cannabis companies to handle their finances. A crop of startups is already working on this. And in Washington D.C., Sessions and his actions has earned rebuke from both sides of the political spectrum.
Legislators Hit Back
What’s received the most criticism in Congress is how Sessions put consumers and states’ rights at risk. Representative Jared Polis (D-CO) told the Rolling Stone, “It leaves the liberty of consumers up to 93 U.S. Attorneys who on a whim could engage in enforcement action against activities that are legal and regulated by states.”
During his successful run for the White House, President Trump himself two years ago said that legal cannabis should be left to the states to decide.
Senator Cory Gardner (R-CO) has reportedly threatened to use any means necessary to thwart the mechanisms of the Department of Justice until Sessions backs off from pot. Gardner has even met with Sessions to discuss his frustrations, and came away thinking that Sessions does not fully understand how out of touch he is with his anti-pot stance.
There’s also the question of the federal government targeting businesses operating legally under their state law. The same Rolling Stone article quoted Representative Carlos Curbelo (R-FL) from the floor of Congress:
“We must work to afford all businesses selling legal products the opportunity to make appropriate deductions and contribute to our economy and create jobs . . . The best ally that those who are operating illegally, the drug cartels, the drug traffickers – who do not pay any taxes, who target children – the best ally they have are the policies that the attorney general has embraced.”
The move by Sessions to crack down on cannabis has also motivated many lawmakers in Congress to move in its defense. Several Democrats are now working on legislation that would federally legalize cannabis. Or at least remove it as a Schedule I narcotic, which places it on the same level of as LSD and heroine.
Kyle Swartz is editor of Cannabis Regulator.