St. Louis Record

Thursday, April 9, 2020

Officials, industry ponder problem of cannabis cash, potential clash with federal banking rules

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By John Breslin | Nov 18, 2019


JEFFERSON CITY – State government officials are sifting through submissions on a draft rule drawn up on how taxes, fees and licenses will be paid ahead of the opening of the first medical marijuana dispensaries.

Dispensary representatives have expressed concern that the rule penned by the Department of Health and Senior Services (DHSS), which will administer and oversee the new industry, will make it difficult for dispensaries, cultivators and others in the business to operate.

The rule, which was open for comment until last week, would make it difficult for the businesses to pay taxes and fees in cash.

This is an issue in many states that have legalized the sale of marijuana as banks, regulated at the federal level, where the possession and sale of the drug remains illegal, are reluctant to become involved in accepting money from the industry.

A move to protect banks from any federal sanctions was made in Washington with the passage in the U.S. House by a wide bipartisan margin of HR 1595, the Secure and Fair Enforcement Banking Act, also known as the SAFE Banking Act. It is currently with the Senate Committee on Banking, Housing, and Urban Affairs.

Missouri's representatives split on the House vote, which passed in September, with four voting for, the state's two Democrats and two Republicans, with the other four of the latter's members voting against.

Amendment 2, passed by voters last year, allowed the state to issue medical cards and require the licensing of at least 192 dispensaries, 60 cultivation operations, 86 infused product manufacturing licenses and two product-testing facilities by Dec. 31. According to latest figures, just more than 18,000 cards have been issued.

Many of the comments received on the rule are opposed to a complete ban on cash payments, the DHSS said.

"We have received substantial input on the proposal," Lisa Cox, a DHSS spokesperson, said. "Most of the input indicates opposition to a complete ban on cash payments, though some comments are in support of the rule or supportive with some clarification.

"We are reviewing those comments this week. We will then decide whether to file the rule as is, with edits, or not at all. We have not set a deadline for when we will have a final decision," Cox said.

The DHSS said the rule was proposed "to address safety and cost concerns related to transport and delivery of large sums of cash for payment of fees, taxes and penalties."

"However, the rule would not necessarily be a complete ban on cash payments," Cox said. "The medical marijuana program rules include a provision that allows for waiver of any rule for good cause."

Representative of the nascent industry do not believe the draft rule is reasonable right now and want it made clear they can pay the state in cash ahead of what they confidently expect will be the successful passage of the federal SAFE Banking Act.

"It is a question of when, not if," Mark Cardetti, a spokesman for the Missouri Medical Cannabis Trade Association, or MoCannTrade, said. "We would like to see early on that officials make some allowances for licensed businesses until the passage of the act."

Cardetti said some banks have indicated they will take business from the marijuana industry, but there is no wide support among financial institutions that must negotiate their way through a labyrinth of reporting rules in order to work with these types of businesses to safely stay on the right side of federal authorities.

"There is a lot of compliance work and that is why so many of them (the financial institutions)" do not want to get involved with the business at this time, Cardetti said.

The industry is requesting that the rule be changed to make clear that companies do not need to use a bank in the short term, the industry spokesman said.

In general terms, Cardetti said the department has done a "really good job" in implementing what voters decided in November 2018.

"There are already more than 18,000 people with certified medical cards ... (the department) has met the time line," Cardetti said, adding that it often easy to pass such a law but difficult to implement.

He cited the example of Arkansas, which passed its medical marijuana law in 2016 but did not open its first dispensary until May this year.

The first dispensaries are expected to be up and running in Missouri early next year.

At federal level, HR 1595, which passed the House by 321-103, with only one Democrat voting against, states that there shall be "protections for depository institutions that provide financial services to cannabis-related legitimate businesses and service providers for such businesses, and for other purposes."

St. Louis-area representatives, Rep. Lacy Clay (D-1) and Rep. Ann Wagner (R-2) split on the vote, with the former voting for, the latter against. Wagner did not respond to a request for comment on her position on the bill.

The representative voted this year against preventing the Justice Department from prosecuting cannabis users and businesses in states where recreational cannabis is legal, with Clay supporting.

Four Missouri representatives, Clay and fellow Democrat Rep. Emanuel Cleaver along with Republicans Blaine Luetkemeyer and Billy Long, voted for the passage of the bill. Reps. Vicky Hartzler, Sam Graves and Jason Smith, all Republicans, with Wagner, voted against.

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Missouri Department of Health & Senior Services