The California Senate has approved legislation that would create a special class of state-chartered banks to serve the cannabis industry.
S 51 would allow private banks or credit unions to provide depository services to licensed cannabis firms if they secure a limited-purpose state charter. It would put an end to the current situation, which forces marijuana companies to deal mainly in cash due to federal restrictions that make it all but impossible for them to use mainstream banks.
Adult-use cannabis has been legal in the Golden State since Jan. 2018, but it remains illegal under federal law. Banks are prohibited from handling money that comes from “criminal activity” as defined by federal law, and any institutions accepting business from cannabis retailers will be unable to receive federal deposit insurance.
The resulting need for cash puts staff and customers at risk of violent crime, while it also creates a situation that could lead to the state missing out on revenue from taxes.
The bill passed through the Senate 35-1 and it now heads to the Assembly, which could either send it to Gov. Gavin Newsom’s desk or kill it off.
California Senate Majority Leader Robert Hertzberg introduced SB 51 last month. He said this bill is as close as the state can get to providing a safe, secure banking system for the cannabis industry until the federal government changes the law.
If the largest state in the country were to pass this bill, it would put pressure on Congress to federally legalize banking for the cannabis industry. A delighted Hertzberg said S 51 is by no means the ultimate solution to the current problem, but that it represents an important step in the right direction.
“S 51 is a first step in getting cannabis cash off the street and integrating these legal businesses into our economy, and it just cleared a huge hurdle,” said Hertzberg, who has urged campaigners and lawmakers across the state to keep the momentum going.
He had previously introduced S 930 in a bid to create cannabis banks, but it failed to pass the legislature, so he is hoping to have more success this time around.
The governor’s May budget revision slashed forecasts for excise tax revenue on cannabis by $223 million for the 2018-19 and 2019-20 fiscal years, and creating a banking system for the industry could address this shortfall.
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