While passage of the SAFER Banking Act appears dead for the year, the U.S. Government Accountability Office (GAO) is inviting cannabis businesses and financial institutions to participate in focus groups to discuss banking policy and social equity.
The GAO will hold virtual focus groups with cannabis-related business owners and managers in January or February to learn how these businesses and their employees access banking services. A public report is expected to be complete in late 2025, a spokeswoman for the GAO said.
The focus groups are part of an extensive study requested by the Subcommittee on Financial Institutions and Consumer Protection within the Senate Committee on Banking Housing, and Urban Affairs last year.
When the Senate Banking Committee passed the SAFER Banking Act in September 2023, Sen. Raphael Warnock of Georgia was the lone Democrat who voted against the reform bill. He cited concerns that the legislation would only benefit larger banks and not serve the communities that have been hit hardest by the decades-long war on drugs.
Rev. Warnock is chair of the Subcommittee on Financial Institutions and Consumer Protection. He and senators Elizabeth Warren, Tina Smith and John Fetterman sent a letter to GAO on Dec. 19, 2023, requesting “a study regarding the economic effects of the War on Drugs and the role that financial institutions can play in addressing these effects.”
The study should also include how cannabis banking reform could affect the country’s racial wealth gap.
The so-called war on drugs began during the Nixon Administration in 1971, leading to decades of federal and state policies that led to a dramatic increase in arrests and incarceration. Black and Latino people faced higher arrest and incarceration rates than white people.
The senators said that people with criminal convictions in some states are prohibited from voting, accessing housing and obtaining certain employment. This leads to a wealth gap that also makes it difficult for them to obtain mortgages and business loans.
Warnock said in a statement last year that as chairman of the banking subcommittee, “I’m focused on conducting oversight and passing financial policies that improve economic well-being for hardworking people all across America. Doing so requires a fuller understanding of the War on Drugs and its vast consequences on families across America.”
Study to focus on cannabis financial services and equity
The senators’ task to the GAO is a fairly heavy lift. It asks the research agency to examine federal and state actions and policies to address the effects of the war on drugs, particularly on communities of color, and “to what extent (if at all) communities have recovered from those economic effects.”
Specifically, the letter asks the GAO to determine “to what extent would allowing financial institutions to bank state-sanctioned cannabis significantly ameliorate any negative economic effects or disparities arising from the War on Drugs and, if so, to what degree.”
The senators would also like to know, “What federal actions or policies (regulatory, legislative, or otherwise) would reduce regulatory uncertainty and facilitate the role financial institutions can play in addressing the effects of policies related to the War on Drugs.”
Finally, the senators, want the report to address to what degree, “Whether state policies to decriminalize or legalize cannabis have significantly ameliorated the negative economic effects or disparities arising from the War on Drugs.”
Across the nation, states that have legalized adult-use have tried to prioritize business licenses for operators who have prior drug convictions or live in communities hardest hit by the war on drugs, commonly known as social equity licenses. But many have been stymied by lawsuits, such as in New York and Minnesota, or predatory business practices, which Missouri is combating. Social equity business owners also struggle to open doors or remain open under the high costs of doing business in the cannabis industry and obtaining financing.
GAO reaching out across the cannabis industry
To respond to these vast questions, the GAO is reaching out to operators, leaders and experts throughout the cannabis industry.
The agency will hold focus groups with both plant-touching and ancillary cannabis-related businesses, as well as with financial institutions, GAO spokeswoman Jessica Baxter said in an email to CRB Monitor News.
“In addition, GAO is interviewing federal agency officials, banking associations, and cannabis industry groups; analyzing federal agency policies, procedures, and guidance to financial institutions; and reviewing relevant academic studies,” Baxter said.
GAO researchers reached out to the National Cannabis Industry Association over the summer, said Michelle Rutter, NCIA director of government relations.
She said Warnock is “trying to get a holistic picture of what’s out there,” and he wants to be sure legislation “doesn’t just protect larger players, or just banks.”
The NCIA sent an email to its approximately 500 members earlier this month announcing the focus groups and inviting plant-touching businesses to participate. Interested operators are directed to a GAO form with five short questions to apply.
With the incoming Republican-led congress, Rutter said she believes it will continue to be an “uphill climb” to get any cannabis banking reform. But Rep. French Hill, R-Ark., was selected as the next chair of the House Financial Services Committee, and he’s voted for SAFE banking bills in the past. “There’s room to work with him there,” she said.
Rutter said she’s looking forward to the GAO report and believes it “will lend a lot of weight” toward decision-making for cannabis industry financial services.
