‘Nothing has changed’: Frustration builds as cannabis reform stalls

For the cannabis industry, 2021 was supposed to be the year of reform and opportunity.

Democrats were in control of both the White House and Congress, and lawmakers were busy pushing bills to expand banking access for cannabis businesses and offer pathways to expunging criminal records and increasing diversity within the industry.

But one year into a new administration and cannabis reform has largely stalled, fueling disappointment and concern that legalizing or decriminalizing marijuana at the federal level is merely a pipe dream.

A woman smokes a joint while celebrating International Cannabis Day in New York on April 20, 2021. Anthony Behar / Sipa USA via AP file

“Nothing has changed and that’s really frustrating,” said Narmin Jarrous, chief development officer of the Michigan-based cannabis company Exclusive Brands. “We can always make excuses for why things don’t get done but, at the end of the day, that doesn’t help the people in prison and it doesn’t help the people who are continuously being affected by the war on drugs.”

Among those lasting effects is a lack of access to banking, which remains a major obstacle for many cannabis businesses seeking to open checking accounts or apply for loans. Large financial institutions shrink from the industry for fear of running afoul of federal law, which considers marijuana a controlled substance.

In 2020, Catherin Jarrous, her sister and an accountant for Exclusive Brands, was suddenly shut out of her bank account after depositing a paycheck. Her credit cards also were closed without prior notice, affecting her credit score and sending her family into a tailspin as they juggled a newborn and financial upheaval.

A number of other Exclusive Brands employees experienced similar treatment when they tried to cash paychecks at the commercial bank, Jarrous said.

Her sister and other employees never received an explanation — “just a letter and a check” to close out their accounts, she said, adding she believes the bank’s actions were meant to comply with federal law.

Cannabis remains a Schedule 1 drug, like heroin and LSD, under federal law, but 36 states have adopted medical marijuana programs, and its recreational use is legal in 18 states, including Michigan. The discrepancy between state and federal rules creates a quagmire for legal cannabis businesses that follow local regulations.

Two key pieces of legislation — the Secure and Fair Enforcement Banking Act, which would have expanded the industry’s access to financial institutions, and the Marijuana Opportunity Reinvestment and Expungement Act, which would have decriminalized marijuana at the federal level — sought to codify piecemeal laws that have governed the cannabis industry.

Both bills failed to pass in Congress last year.

“It’s easy to get frustrated by the slow pace of change,” said Erik Altieri, executive director of NORML, a national cannabis advocacy organization. “But it’s important to look at those thread marks where this is still moving forward.”

Steven Hawkins, CEO of the US Cannabis Council, a coalition of businesses and advocacy groups, said this is a “critical moment” for Congress in regard to marijuana legalization, and ongoing discussions at the national level signal change is inevitable.

“Rarely does anything happen in Congress in one fell swoop,” he said. “I think the momentum is there. It’s momentum that we will see come to fruition, hopefully, in the next session of Congress.”

Luis Merchan, CEO of the Canadian cannabis company Flora Growth, said he has heard these promises before as he continues to wait for the United States to establish a regulatory framework that would allow his international business to expand its portfolio.

In the meantime, Flora Growth has been forced to limit American business ventures to electronic smoking devices, hemp derivatives and cannabinoid-based topicals. Globally, the company functions on a very different scale, operating a large outdoor marijuana cultivation center in Colombia.

“Last year was a year of optimism,” Merchan said of the company’s prospects in the U.S. “It’s a difficult environment with high bars of entry, but we continue to find ways to operate.”

Flora Growth employs a regulatory team in the U.S. that helps the company navigate a growing web of state marijuana laws that can change from one year to the next, he said.

“The challenge there is that it becomes highly complex because we have to deal with 50 different pieces of legislation, regulatory environments and so forth,” Merchan added. “We need federal legislation for the cannabis industry to truly thrive.”

Kevin Sabet, a former Obama administration drug policy adviser and president of Smart Approaches to Marijuana, an advocacy organization that opposes the legalization of cannabis, says the current regulatory climate mirrors President Joe Biden’s own ambivalence about marijuana.

In 1982, Biden helped coin the phrase “drug czar” when he pushed then-President Ronald Reagan to create a new office dedicated to curbing the flow of narcotics by organized crime.

During the 2020 campaign, Biden took a measured tone on cannabis, favoring talking points that focused on racial and criminal justice rather than legalization. But within two months of taking office, five White House staffers were terminated over cannabis use. The firings came despite the administration’s efforts to balance federal hiring guidelines with state legalization laws.

Biden “supports leaving decisions regarding legalization for recreational use up to the states; rescheduling cannabis as a Schedule II drug so researchers can study its positive and negative impacts; and, at the federal level, he supports decriminalizing marijuana use and automatically expunging any prior criminal records,” White House Press Secretary Jen Psaki said during an April press briefing.

He also supports legalizing medicinal cannabis, she added.

If the slow pace of change at the federal level is a surprise to anyone, “then they haven’t been paying attention to Joe Biden,” Sabet said.

While legislation continues to work its way through Congress, businesses say they are suffering in the doldrums.

A spate of robberies tore through the Northern California cannabis industry in November, causing some $5 million in losses. Many of the businesses targeted kept cash on the premises because they did not have access to large banking institutions.

One operator in Oakland said his business was broken into five times and his tax money stored in a safe was stolen.

Jarrous has found financial reprieve by transferring her business transactions to a local credit union, where the fees are much higher than at a commercial bank and the vetting dragged on for months before the company was accepted.

But the peace of mind is worth it, she said.

“I know there are paths forward for the industry, but I’m becoming more and more cynical of Congress’ ability or desire to do anything,” she said.

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