The legalization of marijuana as a medicine in 33 states, 11 of which allow its use as a recreational drug, has made weed a dynamic American industry, among the economy’s fastest-growing sources of new jobs. California alone, with $3.1 billion in projected marijuana sales for this year, has a legal market as large as that of any country on the planet.
Entrepreneurs grumble nonetheless. Not since Ronald Reagan ran for president have American newspapers been so full of anecdotes about heroic jobs-creating businessmen stymied by regulation.
Their gripe concerns banking. Marijuana may be legal in many states, but it remains illegal under federal law, which classifies it, implausibly, as a highly dangerous Schedule 1 narcotic. A bank that does business with weed growers or sellers therefore puts its assets at risk. Proprietors of marijuana businesses find it hard to start 401(k) retirement plans for workers and to get insurance. They can’t avail themselves of federal bankruptcy protection. And they need to conduct a lot of their business in cash.
To fix this problem, Congress is considering the Secure and Fair Enforcement (SAFE) Banking Act, which would create a “safe harbor” against federal bank regulators in states where marijuana has been legalized. The bill has 206 co-sponsors and breezed through the House’s Financial Services Committee in March. Treasury Secretary Steven Mnuchin backs it. So does Representative Maxine Waters, Democrat of California. It appears to be a matter of bipartisan logic and common sense.
It is true that the available banking for marijuana business is unstable, most of it provided by state-chartered banks and credit unions that do not have the federal government as their primary regulator. It is also true that marijuana-related banking is expensive — $5,500 a month for a checking account at one bank in Massachusetts, according to The Boston Globe.
But reform could make matters worse. Big investment banks and corporations want a more streamlined banking regime in order to scale up marijuana operations. Many members of Congress have rallied behind the SAFE Banking Act not because their voters care about pot but because their donors care about money. The old hippie who grows a couple of plants in his backyard in Santa Cruz is not the guy who is paying the former House speaker John Boehner to lobby on behalf of the National Cannabis Roundtable.
Relatively well-capitalized pot businesses are already turning into big corporations. Last year Bank of America and Goldman Sachs reportedly advised Constellation Brands on a $4 billion investment in Canopy Growth, a “multifaceted cannabis company” headquartered in Ontario. (Marijuana is legal nationally in Canada.) On Tuesday the retired New England Patriots tight end Rob Gronkowski revealed his new role as a spokesman for Abacus, a corporation that sells cannabis-derived health products.
Any businessman would want in on marijuana. It is a legal drug, and a legal drug is a gold mine. If it is addictive, it creates a compulsion to purchase. As we learned from the tobacco hearings of the 1990s, not all businessmen can resist exploiting their customers’ compulsions. The National Institute on Drug Abuse says marijuana “can” be addictive. But even if a drug is merely “habit forming,” as many doctors believe marijuana to be, it creates an unlevel playing field between seller and consumer. The more “efficient” the market, the more powerful this inequality.
Whether or not marijuana’s Schedule 1 classification makes sense medically, it serves a purpose politically. Often government intervention requires thwarting businessmen’s antisocial impulses, not just unleashing their productive ones. Politicians are reluctant to admit to being “anti-business.” So a lot of useful regulation gets carried out under pretexts.
Adding sophisticated banking to the pot business will do more than make it more “logical.” It will also turn an artisanal space into a corporate one. It will change what we mean by “legalized marijuana.” In referendum questions over the past decade, Americans have been making big decisions based on such thoughts as, “Should my 19-year-old daughter be put at risk of prison because she was caught with a joint at the freshman mixer?” Voters in many states have seen legalizing marijuana as the prudent choice. Corporations didn’t enter into it.
But corporations bring to the fore questions of size, power and accountability. Do we want multinational businesses using vast marketing budgets and gifted creative teams to teach our children that smoking a lot of pot is somehow sexy, or manly, or sophisticated? Do we want labs to come up with new flavors and varieties that turn pot-smoking into an adventure in connoisseurship and a way of demarcating oneself by class? Would we be content with a Microsoft of marijuana?
You might still want pot to be legal under these circumstances, but it seems likely that sentiment in its favor would weaken, especially in an age when Joe Camel and OxyContin have become symbols of how corporations market legal drugs. Losing popular support could cost marijuana its legal status. Or it could simply mean an embattled legality, maintained through some of the tactics other outcast interests have used: lobbying, regulatory capture, the funding of tendentious research.
Good political outcomes are often accidental. Institutions get built at some arbitrary resting place between two clashing logics. Our current marijuana banking regime is the result of such an accident. It is where the half of the country that wants a retreat back to criminalization meets the half that wants a rush ahead to megamarijuana. For now it may be the country’s best way to avoid a premature and destructive consolidation.
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