A top banking regulator in Louisiana, along with 12 colleagues in other cannabis-legal states, is asking the U.S. Congress to clear the way for banks to be able to do transactions with cannabis businesses.
John Ducrest, commissioner of Louisiana’s Office of Financial Institutions, joined other state financial regulators who signed a letter addressed to congressional leaders seeking safe harbor legislation for banks that are willing to do business with cannabis companies.
The relationship between cannabis and banking institutions
If you don’t already know, the cannabis industry has been struggling to find financial institutions that are willing to handle its money. Major banks and financial organizations in the United States are hesitant to do transactions with cannabis businesses for fear of getting persecuted by the federal government.
This is because despite some states having already legalized cannabis, the drug remains prohibited and illegal at federal level. Large banks have simply sidestepped the cannabis industry to avoid regulatory headaches and costly compliance-related penalties.
As a result, cannabis growers, producers, dispenaries, and other cannabis business owners have limited themselves to cash-based transactions only and keeping their cash out of the banking system.
In a move to change this, state financial regulators have formed a coalition and are urging lawmakers to take out the unnecessary risks for banks that are doing business with the cannabis industry. The coalition is headed by Pennsylvania’s top banking official.
The letter to lawmakers
In their letter, the 13 state financial regulators said that the current financial arrangement used by the cannabis industry raises concerns with respect to public safety and makes it difficult to track the flow of funds. Moreover, it contributes to a loss of economic activity, community development, and workforce development opportunities.
The letter was sent to House leaders Paul Ryan (R-Winsconsin) and Nancy Pelosi (D-California), and to Senate leaders Mitch McConnell (R-Kentucky) and Chuck Schumer (D-New York).
Aside from Louisiana, the letter was signed by banking regulators from New York, Nevada, Montana, Oklahoma, Alaska, Hawaii, Connecticut, Michigan, Pennsylvania, Oregon, and Washington state.
Louisiana’s cannabis industry
Louisiana has a thriving medical cannabis program.
The Louisiana State University has selected Las Vegas-based GB Sciences as its exclusive medical cannabis grower. This makes GB Sciences one of only two state-approved cultivators.
Meanwhile, there are eight or nine state-approved pharmacies that are getting ready to dispense medical cannabis over the next few months.
The state’s nascent industry has already found a limited number of willing local banks. However, one of these banking partners — Red River Bank in Alexandria — has just bailed out.