On Tuesday, lawmakers in Washington, D.C., approved a bill that would significantly alter the city’s medical marijuana program. The bill would, among other things, remove licensing caps on cannabis businesses, reduce taxes for operators, increase efforts to promote social equity, and establish new categories of regulated businesses, such as on-site consumption facilities and cannabis cooking classes.
Additionally, it would allow current “gifting” operators, who sell non-cannabis items in exchange for “free” marijuana products, to transition into the permitted market while granting authorities the ability to crack down on those who continue to operate unlawfully.
The measure, which had been revised by the Committee of the Whole earlier in the day, was passed by the full D.C. Council by a vote of 7 to 4.
A second reading vote by the Council is still required before it can be sent to the mayor’s office.
Pro-reform lawmakers have voiced concerns that the bill’s most recent iteration may have unintended consequences for social fairness by granting preferential treatment to already established medical cannabis outlets.
Legally, adults would be able to selfcertify their medical marijuana use according to the Medical Cannabis Amendment Act.
Council Chairman Phil Mendelson (D) introduced the legislation on behalf of Mayor Muriel Bowser (D).
A note prepared for the hearing by the Committee of the Whole states that the most recent print “retains a majority of the adjustments and additions made by” the Committee on Business and Economic Development (CBED), which passed the measure last week.
It had progressed out of a different panel before.
Rhode Island Rakes In $1.6 Million in First Week of Recreational Pot Sales
Rhode Island’s new adult-use cannabis market opened for business earlier this month, and so far, business is good.
Local news station WPRI, citing the state’s Department of Business Regulation, reported this week that “Rhode Island’s six marijuana dispensaries — five of which are currently authorized to sell to recreational customers — collectively sold just over $1.63 million worth of marijuana from Dec. 1 to Dec. 7.”
“Less than half of those sales were for recreational marijuana, at about $786,000. The rest, about $845,400, were sales to medical marijuana patients,” the station reported. “For comparison, during the last week of October — the most recent full week available prior to recreational sales — the dispensaries collectively sold $1 million worth of medical marijuana.”
Rhode Island legalized recreational cannabis use in May, when Gov. Dan McKee signed a bill that was passed by lawmakers in the state General Assembly.
The law made it legal for adults aged 21 and older to cultivate and possess marijuana, while also establishing the regulatory framework for cannabis sales.
“This bill successfully incorporates our priorities of making sure cannabis legalization is equitable, controlled, and safe,” McKee, a Democrat, said in a statement at the time. “In addition, it creates a process for the automatic expungement of past cannabis convictions. My Administration’s original legalization plan also included such a provision and I am thrilled that the Assembly recognized the importance of this particular issue. The end result is a win for our state both socially and economically.”
Additionally, the law “will give courts until July 1, 2024, to automatically expunge past convictions, and those who want their expungement sooner may request it,” the governor’s office explained in a press release at the time.
Late last month, McKee and the state’s Department of Business Regulation’s Office of Cannabis Regulation announced that “five licensed medical marijuana compassion centers have received state approval to begin selling adult use marijuana on or after December 1.”
The five “compassion centers” that were given approval to begin adult-use sales are: Aura of Rhode Island (Central Falls); Thomas C. Slater Center (Providence); Mother Earth Wellness (Pawtucket); Greenleaf Compassionate Care Center (Portsmouth); and RISE Warwick (Warwick).
“This milestone is the result of a carefully executed process to ensure that our state’s entry into this emerging market was done in a safe, controlled and equitable manner,” McKee said last month. “It is also a win for our statewide economy and our strong, locally based cannabis supply chain, which consists of nearly 70 licensed cultivators, processors and manufacturers in addition to our licensed compassion centers. Finally, I thank the leadership of the General Assembly for passing this practical implementation framework in the Rhode Island Cannabis Act and I look forward to continuing our work together on this issue.”
Matt Santacroce, who is serving as interim deputy director of the Rhode Island Department of Business Regulation, said last month that the state was “pleased with the quality and comprehensiveness of the applications we received from the state’s compassion centers, and we are proud to launch adult use sales in Rhode Island just six months after the Cannabis Act was signed into law, marking the Northeast’s fastest implementation period.”
“We look forward to continuing to work with the state’s cannabis business community to ensure this critical economic sector scales in compliance with the rules and regulations put forward by state regulators,” Santacroce said.
The launch of recreational sales on December 1 was only one change to Rhode Island’s existing marijuana policy to arrive this month.
WPRI reported that, on the same day, “the state also stopped charging medical patients to obtain or renew their medical marijuana cards,” adding that “there is an expected revenue loss from the pending plan to expunge marijuana possession charges, which will eliminate court fees from those crimes.”
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Dispensaries’ Cashless ATM Transactions Get The Ax
Cannabis dispensaries in several states were left scrambling to find ways to process transactions without cash when a popular workaround to federal banking regulations known as cashless ATMs stopped working for many retailers beginning last week. Cashless ATMs, also known as “point of banking” systems, allow customers to use bank cards instead of cash at cannabis dispensaries, giving retailers and their patrons alike more flexibility when processing transactions for marijuana purchases.
But beginning last week, some of the biggest ATM transaction processors including NCR Corp.’s Columbus Data Services have shut down the ability of cashless ATM transaction processors to use their service, according to unidentified sources cited by Bloomberg. NCR declined to comment on the situation, according to the report.
“This is a pivotal point in cannabis banking,” Ryan Hamlin, chief executive officer of payment technology provider Posabit Systems Corp., told Bloomberg about the cashless ATM shutdowns.
Notice Given Last Year
Late last year, international payment processing giant Visa announced in a memo to retailers that it “was aware of a scheme where POS devices marketed as ‘Cashless ATMs’ are being deployed at merchant outlets.”
The system worked by rounding up purchases, often to multiples of $20, to make the transaction appear to be cash disbursements. Instead, only the change from the transaction would be returned to the customer, and the dispensary would keep the rest to cover the payment for the purchase.
“Cashless ATMs are POS devices driven by payment applications that mimic standalone ATMs. However, no cash disbursements are made to cardholders,” the December 2021 memo continues. “Instead, the devices are used for purchase transactions, which are miscoded as ATM cash disbursements. Purchase amounts are often rounded up to create the appearance of a cash disbursement.
In April, Bloomberg reported that cashless ATM transactions were able to be processed because they were disguised by listing an address of a nearby business such as a fast food restaurant instead of the actual dispensary address. An estimate put the portion of cannabis sales processed through cashless ATM transactions at 25% of the $25 billion in projected annual dispensary sales.
“Those sales could generate more than $500 million in fees for payment processors, based on average purchase sizes,” Bloomberg reported.
Banking Laws Hinder Legitimate Cannabis Businesses
The popularity of cashless ATM transactions is indicative of the difficulty federal regulations pose for cannabis businesses, even those operating legally under state law. Federal banking and money laundering laws put restrictions on the banking industry, making it difficult for financial institutions to provide traditional services such as credit card processing, loans, and deposit and payroll accounts. But cashless ATMs fail to pass muster with the federal regulations.
“The cashless ATM trend is damaging to investors, dispensaries, and consumers, as when it comes down to it, it’s blatant money laundering,” CannaTrac CEO Tom Gavin told High Times. “Instead of creating loopholes and using a cashless ATM, dispensaries should take advantage of other solutions currently on the market that are safe, legal, and transparent. A proper financial solution should be registered with FinCEN and have a money transmitter license, or be the agent of a sponsor or bank with a money transmitter license in their state.”
Hamlin of Posabit said that signs of the cashless ATM shutdown began to appear in November and increased last week. He estimated that by the end of the weekend, only about 20% of the cannabis industry was still able to use cashless ATM payments.
Cannabis dispensaries in Arizona, California, and Massachusetts have reportedly been affected by the shutdown of cashless ATM transactions, with employees at those shops recommending that they pay for their purchases with cash instead. Curaleaf Holdings, one of the largest cannabis retailers in the United States, reported in April that approximately one-third of the company’s dispensary transactions were processed through cashless ATMs.
“It’s left merchants in the lurch because it happened overnight, but the writing has been on the wall for a while now,” said Peter Su, a senior vice president at Green Check Verified, a consulting and software company that specializes in cannabis and banking.
Sahar Ayinehsazian, a partner at Vicente Sederberg LLP and co-chair of the law firm’s Banking and Financial Services Access Group, said that the shutdown of the cashless ATM system illustrates the need for the passage of legislation now pending before Congress that would allow legal cannabis businesses access to banking services.
“This shutdown further underscores the ongoing need for banking and financial reform for cannabis businesses and the passage of the SAFE Act,” Ayinehsazian wrote in an email to High Times. “While there can be no guarantee that the Act will open up payment processing for cannabis operators, the industry is very optimistic that its passage will facilitate access to legal and legitimate cashless payment options for cannabis operators.”
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SAFE Banking Act Left Out of Defense Spending Bill
A bid to include the SAFE Banking Act in a must-pass defense spending bill has failed, leaving advocates searching for a way to pass the legislation that would grant the legal cannabis industry access to banking services. Proponents of the measure had hoped to include provisions of the banking bill, known as the Secure and Fair Enforcement (SAFE) Banking Act, in the National Defense Appropriations Act (NDAA), an annual spending bill that funds the military. But the latest version of the NDAA released on Tuesday did not include the cannabis banking language.
Under the SAFE Banking Act, federal banking regulators would be prohibited from penalizing banks that choose to serve cannabis firms doing business in accordance with state law. Under current regulations, banks are subject to penalties under federal money laundering and other laws for servicing such companies, leaving the cannabis industry to operate in a risky environment heavy in cash.
The legislation was initially introduced in the House in 2013 by Democratic Rep. Ed Perlmutter of Colorado, who has reintroduced the bill each subsequent congressional cycle. The bill has been passed seven times since 2019 by the House of Representatives, but each time the Senate has failed to bring the legislation to the floor for a vote.
Another amendment supported by cannabis policy reform advocates that would have given the states assistance with expunging past marijuana-related convictions also failed to make it to the final version of the defense spending bill. Before the latest text of the NDAA was released on Tuesday, Senate Majority Leader Chuck Schumer of New York told reporters that he was still working on getting the cannabis banking measure passed.
“It’s a priority for me,” Schumer said. “I’d like to get it done. We’ll try and discuss the best way to get it done.”
Republicans Balk At Adding SAFE To Defense Bill
But later in the day, Senate Minority Leader Mitch McConnell of Kentucky admonished Democrats for attempting to attach amendments not related to defense, including the SAFE Banking Act, to the spending bill.
“Even now, House and Senate Democrats are still obstructing efforts to close out the NDAA by trying to jam in unrelated items with no relationship to defense,” McConnell said on the Senate floor on Tuesday. “We’re talking about a grab bag of miscellaneous pet priorities — like making our financial system more sympathetic to illegal drugs, or the phony, partisan permitting-‘reform’-in-name-only language that already failed to pass the Senate this year.”
“If Democrats wanted these controversial items so badly, they had two years to move them across the floor. Heck, they could have scheduled those matters for votes this week. But no — we’re doing more mid-level nominations, while Democrats keep half-threatening to take our Armed Forces hostage over these extraneous matters,” said McConnell, adding “The Democrats’ failure to plan ahead for unrelated liberal pet priorities should not be creating uncertainty and confusion for the brave servicemembers who keep us safe. My colleagues across the aisle need to cut the unrelated hostage-taking and put a bipartisan NDAA on the floor.”
The failure to include the SAFE Banking Act in the NDAA leaves the prospect of passing the cannabis banking legislation before the current Congress adjourns in two weeks unsettled. Morgan Fox, the political director for the cannabis policy reform group the National Organization for the Reform of Marijuana Laws, said that SAFE could be attached to a pending omnibus appropriations bill or perhaps be approved as standalone legislation.
“I’m glad that we still have other options,” Fox said Wednesday. “It’s pretty disappointing.”
“While there has been momentum and optimism around getting SAFE included in the National Defense Authorization Act, it has been known for some time that getting this through would be a challenge,” Sahar Ayinehsazian, partner at the cannabis law firm Vicente Sederberg LLP, wrote in an email to High Times. “The focus now is on the omnibus appropriations bill, which congress is currently negotiating. SAFE has growing support on both sides of the aisle and I, and many others in the industry close to this issue, think that there is a still a chance that movement can be made on SAFE via the omnibus bill during this session of Congress.”
The SAFE Banking Act is supported by a bipartisan coalition of lawmakers made up primarily of representatives and senators from states that have legalized medical marijuana or adult-use cannabis. The bill passed with overwhelming bipartisan support by a vote of 321-110 in the House last year, and senators from both parties are also in favor of passing the measure.
“The Senator is continuing to work every day to build consensus so we can pass “SAFE Banking” into law this year,” a spokesperson for Montana Republican Senator Steve Daines said in an email on Wednesday.
The senior senator from Montana, Senator Jon Tester, a Democrat, also said he “would like to see it pass this Congress.”
The banking bill is also supported by nearly two dozen governors in states that have liberalized marijuana policy. In a written statement, Conor Cahill, a spokesman for Democratic Colorado Governor Jared Polis, praised the work of Perlmutter and said he expects the legislation to pass this year.
“Governor Polis has long advocated for the passage of the SAFE Banking Act, and has repeatedly called upon Congress to pass this important legislation to protect cannabis-related businesses, support minority, women, and veteran-owned small businesses owners, create jobs, and strengthen public safety in Colorado communities and in the states,” Cahill wrote in a Tuesday email. “We hope and expect to see the final passage of his decade-long effort by the end of the lame-duck session.”
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