Federal Law

Bill that Would Provide Cannabis Industry with Access to Banking and Insurance Services Advances in the House

/ Robert Vacchiano

Iconic image of a bank.As a recreational cannabis bill in the New Jersey legislature stalls, federal legislation directed at expanding the cannabis industry’s access to banking and insurance services advances in Congress.   On March 28, 2019, the U.S. House of Representatives Committee on Financial Services approved H.R. 1595, the Secure and Fair Enforcement (SAFE) Banking Act.  The bill was introduced to allow the cannabis industry to have access to financial services and to enhance public safety by reducing the industry’s reliance on cash.  It provides a safe harbor for financial services companies, including banks, credit unions, and insurers, to serve cannabis-related businesses operating under state law without the threat of regulatory backlash or criminal prosecution.

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Federal Reserve Chair Asks for Clarity on Cannabis Banking Issues

/ Alexander Banzhaf
Image of Fed. Chairman Jerome Powell

Fed. Chairman Jerome Powell

This blog has previously addressed the difficulties the cannabis industry encounters with the current federal banking system.  One potential solution proposed by Governor Murphy was the establishment of a state bank for cannabis businesses only, which has yet to materialize.

A recent development on this issue took place nationally when Chairman of the Federal Reserve Jerome Powell requested clarity on this subject from the Senate Banking Committee.  Chairman Powell was responding to a question from Senator Robert Menendez (D-N.J.), who raised that New Jersey is moving toward legalization of recreational cannabis.  The concern for Senator Menendez – as is the concern for many in the industry – is that cannabis businesses will be shut out of the banking industry and will be forced to operate only in cash, which is a safety risk.

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Early Cannabis Trends in 2019

/ Alexander Banzhaf

With the new year in full swing, New Jersey Cannabis Counsel highlights some of the most impactful news relevant to the potential legalization of cannabis in New Jersey.

New Attorney General Uninterested in Legal Cannabis Businesses?

Photo of William Barr

United States Attorney General Nominee William Barr

New Attorney General nominee William Barr testified at his confirmation hearing that he does not intend to pursue cannabis businesses operating legally pursuant to state regulations.  This is an about-face from former Attorney General Sessions, who rescinded the Cole Memorandum, which was the Obama era policy document that effectively told the Department of Justice to only pursue legal cannabis businesses that were linked to cartels, children or trafficking cannabis to states where it is not legal.  Mr. Barr has also called for additional cannabis cultivation for research purposes, and understands that the new bill legalizing the growth of hemp has implication for cannabis.  Mr. Barr has not formally committed to preparing a revised Cole Memorandum, but if confirmed, Mr. Barr as Attorney General would be a potential boon for the cannabis industry.

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Federal Court Finds that Employers in New Jersey are not Required to Waive Drug Test for Medical Marijuana

/ Jennine DiSomma

Image of Medical Marijuana InsigniaThe issue of whether an employer is required to accommodate an employee’s alleged disability by allowing the use of medical marijuana for chronic pain and waive the requirement that he pass a drug test as a condition of employment, was recently addressed by a New Jersey federal court.  In Cotto, Jr. v. Ardagh Glass Packing, Inc., the plaintiff, a forklift operator, hit his head and was asked to take a drug test to continue his employment.  The plaintiff employee told his employer that he could not pass a drug test because he used medical cannabis for pain management to recover from back and neck injuries.  His employer responded that passing a drug test was a condition of his employment, and he was indefinitely suspended.  The employee filed a lawsuit alleging that the New Jersey Law Against Discrimination (“NJLAD”) required that his employer waive the requirement that he pass a drug test as a condition of employment in order to accommodate his disability.

The employer filed a motion to dismiss the plaintiff’s complaint on the basis that the Compassionate Use Medical Marijuana Act (“Medical Marijuana Act”) did not require the employer to accommodate the employee and allow him to continue working while he was unable to pass a drug test based on the use of a substance that is illegal under federal law.  The United States District Court for the District of New Jersey, Camden Vicinage, granted the employer’s motion to dismiss, finding that neither the Medical Marijuana Act nor NJLAD compelled the employer to waive the employee’s drug test requirement.

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Sen. Gardner Satisfied with Trump Administration’s Position on Legal Cannabis

/ Alexander Banzhaf

Following Attorney General Sessions’ rescinding of the Cole Memorandum, the most vocal opposition has come from within the Republican Party.  Senator Cory Gardner has consistently held up Department of Justice nominees based on his perception that Gen. Sessions reneged on a promise to continue the Obama Administration’s decision not to enforce cannabis laws in states that have legalized.

Recently, Sen. Gardner and President Trump had a private discussion about the cannabis industry and Gen. Sessions.  In response, Sen. Gardner dropped his attacks on Department of Justice nominees, noting:

“I have received a commitment from the president that the Department of justice’s rescission of the Cole memo will not impact Colorado’s legal marijuana industry.  Furthermore, President Trump has assured me that he will support a federalism-based legislative solution to fix this states’ rights issue once and for all.”

Portraits of Senator Gardner and President Trump

Sen. Gardner and President Trump

While this statement does not offer particulars, two important questions emerge.  The first is whether any leniency vis a vis legal cannabis will only be afforded to Colorado – the state with the Republican legislator whose actions were negatively impacting a Republican political agenda – or to all states with legal cannabis (irrespective of the party affiliations of their elected officials).  The second focuses on how serious the President (and the Congress) is about a pledge to resolve the discrepancies between state and federal marijuana laws.

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Attorney General Sessions Clarifies DOJ Position on Legal Cannabis Businesses

/ Jeremy Kleiman

This blog has discussed Attorney General Sessions and his recent actions to rescind the Cole Memorandum, an Obama Administration directive that federal law enforcement should not pursue cannabis businesses operating legally within a state’s regulatory framework.

Recently, General Sessions explained that, notwithstanding the retraction of the Cole Memorandum, the Department of Justice would still functionally follow the same policies based on a lack of resources:

Jeff Sessions“We’re not going to be able, even if we desired, to take over state enforcement of routine cases that might occur,” Sessions acknowledged. “Federal agents are highly paid, highly trained, and they work on cases involving cartels, international organizations, major distribution networks, large amounts of cash. And they deal with criminal organizations, RICO-type cases. And we’re not out there prosecuting those cases every day.”

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Bipartisan Group of Senators Fight Back Against Attorney General Sessions

/ Alexander Banzhaf

On February 12, 2018, a bipartisan group of senators wrote a letter (“the Letter”) to Sen. Thad Cochran (R. Mississippi), Chairman of the U.S. Senate Committee on Appropriations and Sen. Patrick Leahy (D. Vermont) to fight back against Attorney General Sessions’ actions on January 4, 2018 which rescinded the Cole Memorandum.  The Letter supports the regulatory frameworks of the states which have legalized recreational adult use cannabis and argues that General Sessions’ actions would “deny medications to the sick, push individuals back into illicit markets, and nullify the previously-effective regulations – all while thwarting the democratically-expressed will of the states.”  The Letter otherwise strongly supports states with legal cannabis and attacks Attorney General Sessions’ actions against cannabis.

Jeff Sessions

Attorney General Sessions

The goal of the Letter is to convince the Senate Committee on Appropriations to add language to spending bills to prevent federal enforcement of cannabis laws.  This idea follows the Rohrabacher-Farr Amendment, which prohibits the Justice Department from spending funds to interfere with the implementation of state medical cannabis laws.  This amendment safeguards the medicinal cannabis industry from federal law enforcement.  The Letter seeks to do the same thing for recreational adult use cannabis.  While the Rohrabacher-Farr Amendment and the proposed amendment to the spending bill do not re-write the Controlled Substances Act, the effect would be (and is for medicinal cannabis) to render it meaningless by eliminating funding for its enforcement of cannabis laws.

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Cannabis Businesses and State Banks: a Possible Solution to a Difficult Issue

/ Alexander Banzhaf

One of the more frustrating aspects of the cannabis industry for business owners is the lack of available banking services.  Many banks are hesitant to provide banking services to the cannabis industry because of the conflict between state legality and federal illegality, not to mention the obligation of banks to file Suspicious Activity Reports for transactions that may violate the Bank Secrecy Act.  While the number of banks providing services to the cannabis industry is growing, obtaining banking services is still very challenging for cannabis entrepreneurs.  The standoff between banks and the cannabis industry manifests in many frustrating ways, including but not limited to strictly cash businesses, banks who charge excessive services fees to cannabis business clients and the need to use credit unions in lieu of traditional banks (who themselves are fighting their own legal battles).

Iconic image of a bank.

Recently, California proposed an idea that could very well reshape the entire cannabis industry: a state sponsored bank for cannabis businesses.  California State Treasurer John Chiang and Attorney General Xavier Becerra are planning to conduct a feasibility study to test whether a California state bank would help California’s many cannabis businesses.

“We are contending with the emergence of a multi-billion dollar cannabis industry that needs banking services, and a private banking industry that is stymied by federal law in meeting the needs of the new industry,” Chiang said.

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Jeff Sessions Rescinds Cole Memorandum

/ Alexander Banzhaf

On January 4, 2018, Attorney General Sessions unveiled a new policy that effectively rescinds the Cole Memorandum, which set forth the Obama Administration’s position that the federal government would not generally not enforce cannabis laws in states where it is legal.  This is an about-face from General Sessions’ recent testimony where he suggested he would maintain the Obama Administration’s position.  General Sessions’ new policy comes at a time where support for legalization has never been higher, as a recent Gallup poll suggested 64% of Americans favor legalization.  Unlike the Cole Memorandum, which discouraged enforcement of cannabis laws, Gen. Sessions’ policy allows US Attorneys to exercise their own judgment as to whether to enforce cannabis laws.

Jeff Sessions

Clearly, General Sessions’ announcement has the potential to have a major impact on the legal cannabis industry.  His new policy, though, has already started a political battle.  Cory Gardner, the Republican Senator from Colorado, immediately took to Twitter to oppose General Sessions’ action, arguing that cannabis policy should be a states’ rights issue.  Sen. Gardner stated that he was “prepared to take all steps necessary, including holding DOJ nominees, until the Attorney General lives up to the commitment he made to me prior to his confirmation.”  Presumably, the commitment Sen. Gardner spoke of was adherence to the Cole Memorandum.

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Ron Wyden Joins Booker Bill

/ Alexander Banzhaf

Senator Ron Wyden (D-Ore.) recently announced that he is co-sponsoring the Marijuana Justice Act of 2017 (“the Booker Bill”), a bill previously introduced by New Jersey Senator Cory Booker.  The Booker Bill seeks to decriminalize marijuana across the nation and penalizes states with high arrest and incarceration rates with respect to marijuana related crimes.  The Booker Bill also seeks to establish a “Community Reinvestment Fund”, a fund comprised of monies not provided to states in violation of the disproportionate arrest rates.  The Community Reinvestment Fund will be used to provide funds to “reinvest in communities most affected by the war on drugs” and includes grants for job training, public libraries, community centers and other programs designed to enhance the community.  The Booker Bill proposes spending at least $500,000,000 for each fiscal year.

Booker_Wyden

Senator Corey Booker (D-NJ) and Senator Ron Wyden (D-Ore.)

Senator Wyden joined Senator Booker on a Facebook Live video to discuss the thrust of Bill and his co-sponsorship.  His position echoed Senator Booker’s, which was that both Senators viewed the Booker Bill as a vehicle to combat the disproportionate impact of the war on drugs on minority communities.

The Booker Bill is not likely to succeed.  Senator Wyden is only the second co-sponsor, after the Booker Bill was originally proposed in August of 2017.  Similar bills seeking major marijuana reform have not gained much traction.  Nevertheless, efforts such as those by Senators Booker and Wyden begin a national conversation on the issue of cannabis reform.

The Booker Bill will not likely have any material impact on New Jersey’s push to legalize recreational adult use cannabis.  We will provide updates if the Booker Bill gains additional co-sponsors.