A congressional spending bill released on Tuesday not only excludes the marijuana banking and expungements reform that advocates had hoped for, but also preserves a rider that blocks Washington, D.C. from implementing regulated, adult-use cannabis commerce.
Adding to the frustration of advocates, the slew of additional drug policy reforms that the House included in its versions of various appropriations bills it advanced earlier this year were all omitted from the final deal.
The omnibus development represents the second major setback for supporters of the Secure and Fair Enforcement (SAFE) Banking Act during the lame duck session. After the proposal was excluded from the National Defense Authorization Act (NDAA) earlier this month, the hope was that appropriations could serve as the vehicle for protecting banks that work with state-legal marijuana businesses. That didn’t pan out.
Despite Senate Majority Leader Chuck Schumer (D-NY) “making a last ditch effort” to put cannabis banking reform in the omnibus, as one senior Democratic Senate staffer put it last week, negotiations failed to produce a package that includes the measure.
Adding insult to injury, the large-scale spending legislation continues the policy of preventing the District of Columbia from spending its own local tax dollars to legalize adult-use cannabis sales despite the fact that earlier versions of spending bills that advanced in the House and Senate earlier this year did not contain the rider.
The ongoing federal blockade and the resulting inability of local officials to enact cannabis sales regulations has led to a proliferation of unlicensed marijuana retailers in the nation’s capital. President Joe Biden has angered advocates by proposing to continue the ban in his first two budget proposals.
Meanwhile, a rider that’s been annually renewed since 2014 to prevent the Justice Department from using its funding to interfere in the implementation of state-level medical cannabis programs was kept intact in the omnibus bill—but a key House-passed provision that would have extended those protections to all state and territory marijuana markets was left out.
The lack of SAFE Banking language leaves supporters with few legislative options—and very little time—to advance the reform during the final weeks of the lame duck. It’s still theoretically possible that the bill, or the broader SAFE Plus package that Schumer has been working on, could be introduced as a standalone—but with only days left before lawmakers adjourn for the year that seems like a remote possibility at best.
The SAFE Plus legislation in its current form is said to contain marijuana banking in addition to other proposals related to cannabis expungements and gun rights for marijuana consumers, among other provisions, but so far lawmakers have been unable to find a vehicle to pass it through.
Sen. Steve Daines (R-MT), the lead GOP sponsor of the SAFE Banking Act, decried its being left out of the appropriations measure.
“The failure to pass my bipartisan ‘SAFE Banking Act’ means communities in Montana and across our country will remain vulnerable to crime where legal businesses are forced to operate in all-cash,” he said in a press release. “This bill to promote public safety would have been well positioned to pass had it gone through the regular committee process—as I called for more than a year ago. Our small businesses, law enforcement and communities deserve better.”
Most advocates will now look ahead to 2023 and the possibility of advancing the reform in a divided Congress.
While disappointing to supporters, the omissions aren’t especially surprising given recent comments from both Democratic and Republican lawmakers. Some members like Schumer and House SAFE Banking sponsor Rep. Ed Perlmutter (D-CO) had put up a fight to preserve the language, but others made clear that they felt the issue would need to be handled in the 118th Congress, with Democrats in control of the Senate and the House going to Republicans.
Senate Minority Leader Mitch McConnell (R-KY), who applauded the exclusion of marijuana banking from NDAA earlier this month, insisted that Congress treat the proposal the same when it came to omnibus appropriations, for example.
Senate Banking Committee Chairman Sherrod Brown (D-OH) had signaled that he viewed cannabis banking as a likely 2023 issue, though a staffer said last week that he was still be open to passing it through the spending package if it contained broader provisions.
Rep. Patrick McHenry (R-NC), who will serve as chairman of the House Financial Services Committee in the next Congress, recently indicated that he similarly feels the issue will need to be decided after the lame duck. The congressman said that he remains opposed to SAFE Banking, but he left the door open to advancing it if that’s the will of his Republican colleagues.
“What I’ve pledged is having an open process. I told my members my view of it,” he said. “Members are able to come to their own conclusion about the bill. It’s so variable state by state.”
For his part, Sen. Cory Booker (D-NJ) has pinned blame on McConnell, saying that his vocal opposition to cannabis reform has had a chilling effect of GOP members who might otherwise be amenable to passing legislation that contains SAFE Banking language.
“They’re dead set on anything in marijuana,” he said, referring to Republican leadership. “That to me is the obstacle.”
“The caucus is clearly divided but the people in power in their caucus are clearly against doing anything on marijuana,” he added.
Earlier this month, SAFE Banking sponsor Sen. Jeff Merkley (D-OR) said that he would “keep fighting” to get the reform “passed this year,” adding that “this is not the end of the road.”
“We need to make sure that legal cannabis businesses have access to the financial services they need—operating in cash is an open door to robbery and money laundering,” he said. That’s also a point highlighted in a recent analysis that looked at the trends and motivations for crimes targeting cannabis businesses in Washington State.
A problem that recently emerged amid negotiations over defense and spending legislation was a summer memo from the Justice Department that was drafted at the request of Senate Republicans and surfaced this month, outlining possible unintended consequences of the marijuana banking reform as it relates to issues like money laundering enforcement.
A small group of Senate Republicans met with DOJ last week to seek assurances that issues it raised over SAFE Banking were effectively resolved. Sources previously told Marijuana Moment that the concerns were addressed, but it’s become clear that McConnell and other lawmakers weren’t satisfied.
“While we are disappointed that the Senate was unable to pass this critical piece of legislation before the end of this Congress, we remain hopeful that the work we have been doing with our allies on the Hill to improve the final package will pay off when Congress reconvenes in 2023,” Minority Cannabis Business Association (MCBA) Board President Kaliko Castille said in a statement on Monday.
“During our conversations with Senate staffers it’s been clear that we have support for amendments that MCBA has been advocating for, including; adding safe harbor language to include Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs), ending discrimination against cannabis entrepreneurs in Small Business Administration (SBA) programs, and adding language from the H.O.P.E. Act to help state and local governments move forward with record expungements for cannabis offenses,” he said. “We will keep pushing for these changes and look forward to working with Congressional members from both sides of the aisle to make it happen.”
NORML Executive Director Erik Altieri said that “Democrats have promised action on cannabis consistently for the last two years, yet leadership consistently failed to prioritize and advance marijuana reform legislation, including legislation to provide clarity to banks and to provide grant funding for state-level expungements efforts, despite having several opportunities to do so.”
“Democrats’ failure and the GOP’s continued resistance to any progress is out of step with voters’ opinion, is bad politics, and most importantly, it is bad public policy,” he said. “Until Congressional action is taken, state-licensed marijuana businesses, the hundreds of thousands of people they employ, and the millions of Americans that patronize them will continue to be at a higher risk of robbery due to the cash-heavy nature of this industry created by outdated federal laws. Furthermore, smaller entrepreneurs who seek to enter this industry will continue to struggle to compete against larger, more well-capitalized interests.”
SAFE Banking was just one component of various appropriations bills that the House and Senate considered or advanced this year. The prior legislation also contained numerous other provisions ranging from protecting state marijuana programs from federal interference to removing the congressional blockade that’s prevented Washington, D.C. to implement a system of regulated cannabis sales for adults. Those were also omitted in the final deal.
Here’s the provision banning D.C. from legalizing recreational marijuana sales that’s being continued:
“SEC. 809. (a) None of the Federal funds contained in this Act may be used to enact or carry out any law, rule, or regulation to legalize or otherwise reduce penalties associated with the possession, use, or distribution of any schedule I substance under the Controlled Substances Act (21 U.S.C. 801 et seq.) or any tetrahydrocannabinols derivative.
(b) No funds available for obligation or expenditure by the District of Columbia government under any authority may be used to enact any law, rule, or regulation to legalize or otherwise reduce penalties associated with the possession, use, or distribution of any schedule I substance under the Controlled Substances Act (21 U.S.C. 801 et seq.) or any tetrahydrocannabinols derivative for recreational purposes.”
Here’s an overview of the drug policy provisions that were excluded in the final spending package:
The House included a provision in its spending legislation that would prevent federal intervention in all state, territory and tribal cannabis programs.
“SEC.__. None of the funds made available by this Act to the Department of Justice may be used to prevent a State, the District of Columbia, or a Territory of the United States from implementing a law authorizing the use, distribution, possession, or cultivation of marijuana.
SEC.__. None of the funds made available by this Act to the Department of Justice may be used to prevent an Indian Tribe (as such term is defined in section 4 of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 5304)) from enacting or implementing a tribal law that authorizes the use, distribution, possession, or cultivation of marijuana.”
Another tribe-specific provision was also featured in a House spending bill that advocates were tracking.
“SEC. 130. None of the funds appropriated by this Act to the Department of Justice or its agencies or bureaus or the Department of the Interior, Bureau of Indian Affairs, Office of Justice Services, including those agency funds distributed to any Indian tribe (as such term is defined in the Federally Recognized Indian Tribe List Act of 1994 (25 U.S.C. 5130(2))) via the Indian Self-Determination and Education Assistance Act (25 U.S.C. §5301, et. seq.), may be used to enforce federal laws criminalizing the use, distribution, possession, or cultivation of marijuana against any person engaged in the use, distribution, possession, or cultivation of marijuana in Indian country (as defined by 18 U.S.C. § 1151), where tribal laws authorize such use, distribution, possession, or cultivation of marijuana, subject to the following:
(1) unless federal law subjects the Indian lands (as such term is defined in the Indian Gaming Regulatory Act (25 U.S.C. 2703(4)) to the civil and criminal laws of the state and the tribal laws authorizing the use, distribution, possession, or cultivation of marijuana do not comply therewith or the Indian lands are not in a state that has legalized marijuana for any purpose; and
(2) provided the governing Indian tribe (Federally Recognized Indian Tribe List Act) takes reasonable measures under tribal marijuana laws to ensure that marijuana is prohibited for minors; marijuana is not diverted to states or tribes where marijuana is prohibited by state or tribal law; marijuana is not used as a means for trafficking other illegal drugs or used to support organized crime activity; and marijuana is not permitted on Federal public lands.”
Use and possession of marijuana by immigrants could not have been used as the sole basis for penalization by the Department of Homeland Security under another House provision that was excluded.
“Sec. 536. No Federal funds may be used by the Department of Homeland Security to deny any benefit application for admission, or protection available to an individual under the Immigration and Nationality Act on the sole basis of any event, conduct, finding, admission, history of substance use disorder, arrest, or juvenile adjudication related to cannabis possession, consumption, or use, or to a conviction solely based on such possession, consumption, or use.”
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Another omitted provision said that the Federal Communications Commission (FCC) could not use federal funds to penalize TV or radio broadcasters for airing cannabis ads in jurisdictions that permit the sale of such products.
“SEC. 512. Notwithstanding section 421 of the Controlled Substances Act, or any other provision of law, none of the funds made available in this Act to the Federal Communications Commission may be used, with respect to an authorization for radio or television stations, to deny, fail to renew for a full term or condition the authorization, decline to approve an application for authority to assign the authorization or transfer direct or indirect control of the licensee, require an early renewal application, or impose a forfeiture penalty because the station broadcast or otherwise transmitted advertisements (a) of a business selling cannabis or cannabis-derived products, the sale or distribution of which is authorized in the State, political subdivision of a State, or Indian country in which the community of license of a station is located, or (b) of a business selling hemp, hemp-derived CBD products or other hemp-derived cannabinoid products.”
There was also general banking language to safeguard financial institutions that work with state-legal marijuana or hemp businesses that didn’t make the cut.
“SEC. 631. None of the funds made available in this Act may be used to penalize a financial institution solely because the institution provides financial services to an entity that is a manufacturer, a producer, or a person that participates in any business or organized activity that involves handling hemp, hemp-derived cannabidiol products, other hemp-derived cannabinoid products, marijuana, marijuana products, or marijuana proceeds, and engages in such activity pursuant to a law established by a State, political subdivision of a State, or Indian Tribe. In this section, the term ‘State’ means each of the several States, the District of Columbia, and any territory or possession of the United States.”
In the House version, there was additionally a section to prevent the Department of Education from penalizing universities simply because the institutions are conducting research into marijuana. Again, it was not included in the final deal.
“SEC. 314. None of the funds appropriated by this title for the Department of Education shall be withheld from an institution of higher education solely because that institution is conducting or preparing to conduct research on marihuana as defined in 21 U.S.C. 802(16).”
The final package kept two reform riders that have been annually renewed, protecting state-level medical cannabis and hemp programs from DOJ interference:
“SEC. 531. None of the funds made available under this Act to the Department of Justice may be used, with respect to any of the States of Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming, or with respect to the District of Columbia, the Commonwealth of the Northern Mariana Islands, the United States Virgin Islands, Guam, or Puerto Rico, to prevent any of them from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical marijuana.”
…
“SEC. 530. None of the funds made available by this Act may be used in contravention of section 7606 (‘‘Legitimacy of Industrial Hemp Research’’) of the Agricultural Act of 2014 (Public Law 113–79) by the Department of Justice or the Drug Enforcement Administration.”
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“SEC. 741. None of the funds made available by this Act or any other Act may be used—
(1) in contravention of section 7606 of the Agricultural Act of 2014 (7 U.S.C. 5940), subtitle G of the Agricultural Marketing Act of 1946, or section 10114 of the Agriculture Improvement Act of 2018; or
(2) to prohibit the transportation, processing, sale, or use of hemp, or seeds of such plant, that is grown or cultivated in accordance with section 7606 of the Agricultural Act of 2014 or Subtitle G of the Agricultural Marketing Act of 1946, within or outside the State in which the hemp is grown or cultivated.”
Another provision that’s being continued—but one which reform advocates oppose because they say it unnecessarily inhibits research into controlled substances—restricts the use of federal funds to promote legalization of Schedule I drugs. On the House side, Rep. Alexandria Ocasio-Cortez (D-NY) previously tried to remove it through an amendment, but it twice failed in floor votes.
“SEC. 509. (a) None of the funds made available in this Act may be used for any activity that promotes the legalization of any drug or other substance included in schedule I of the schedules of controlled substances established under section 202 of the Controlled Substances Act except for normal and recognized executive-congressional communications.
(b) The limitation in subsection (a) shall not apply when there is significant medical evidence of a therapeutic advantage to the use of such drug or other substance or that federally sponsored clinical trials are being conducted to determine therapeutic advantage.”
Beyond the drug policy provisions that were or could have been added to the final appropriations legislation itself, both the House and Senate had also included marijuana and psychedelics policy sections in reports attached to their earlier spending bills.
Those sections touched on a variety of issues, including reforming federal employment requirements with respect to marijuana, promoting research into psychedelics, encouraging CBD marketing regulations, revising federal hemp regulations in accordance with industry requests and more.
Reports attached to the final omnibus legislation contain only a few passages relevant to cannabis and drug policy:
One concerns medical cannabis and the Department of Veterans Affairs.
“Medical Cannabis.—The agreement acknowledges the Department is in the process of updating [Veterans Health Administration] Directive 1315, Access to VHA Clinical Programs for Veterans Participating in State-Approved Marijuana Programs, and encourages the Department to not interfere with a veteran’s decision to participate in such programs and document it appropriately, to the extent allowable under Federal law.”
Other sections touch on hemp issues.
“Hemp Testing Technology.—The agreement reiterates the directive in the joint explanatory statement accompanying Public Law 117- 103 under this heading, and DEA shall submit updated reports consistent with that directive.”
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“The agreement recognizes the need for biobased and U.S. grown alternatives to plastic. The agreement directs the Secretary to explore U.S. based hemp as a robust and dependable plastic alternative and issue a report to the Committees within 180 days of passage of this Act.”
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“The agreement recognizes the growing interest for U.S. hemp and hemp-based products for a variety of uses and directs [Farm Credit Administration] to work with the institutions under its jurisdiction to provide access to guaranteed loans for hemp producers and businesses.”
The omnibus appropriations legislation will be considered in the Senate first before moving to the House, where its first stop with be the Rules Committee. It’s possible SAFE Banking could be proposed as an amendment, but it’s unlikely given the high-level negotiations that it took to get to this stage and the fact that a continuing resolution is set to expire at the end of the week.
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Image element courtesy of Tim Evanson.
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