Congressman Ed Perlmutter & The SAFE Banking Act

Tyler Podcast Episode 80, Transcript

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Episode Summary

Congressman Ed Perlmutter, Former U.S. Representative for Colorado’s seventh Congressional District (2007-2023), joins Tyler's Alex Valvassori to discuss the SAFE Banking Act, SAFER Banking Act, and the Congressman's history with legalizing and regulating cannabis within the United States. The episode touches on the history of cannabis regulation in the U.S. government, Congressman Perlmutter's first-hand experience in Congress with monetary policy, and predictions for the future of the cannabis industry.

Transcript

Congressman Ed Perlmutter: 50 years ago, under Richard Nixon, was really the last time anything's been done on cannabis, but 50 years ago, it was made illegal. It was made this schedule one drug.

Now we're at 48 states that have some level of cannabis use and so the states have moved forward and the federal government hasn’t. But we got the one big change, which is HHS recommending that it be rescheduled from a schedule one totally illegal to schedule three.

Jade Champion: From Tyler Technologies, it's the Tyler Tech Podcast where we talk about issues facing communities today and highlight the people, places, and technology making a difference. I'm Jade Champion, and I'm the Marketing Program Specialist here at Tyler. I appreciate you joining me for another episode of the Tyler Tech Podcast.

Today, we're bringing you a special episode featuring an interview with Congressman Ed Perlmutter - a former U.S. representative for Colorado’s seventh Congressional District.

In this interview, Tyler's Alex Valvassori asks Congressman Perlmutter to walk us through the history of the SAFE Banking Act bill and the challenges he's encountered over the years. The Congressman also talks about the introduction of the SAFER Bill, which is a new iteration of SAFE. We also get his take on where he sees the cannabis industries in years to come. Please note that this conversation was recorded on October 2, 2023. There are references to specific roles held by members of Congress that have become outdated by the time this episode was released on October 16th. I hope you enjoy their conversation.

Alex Valvassori: Hi. My name is Alex Valvassori and I’m the Managing Director for the Tyler Technologies Cannabis Team. I'm thrilled to be joined today by former U.S. Congressman Ed Perlmutter. Congressman, thanks for being with us today.

Congressman Ed Perlmutter: Alex, it's great to be here.

Alex Valvassori: So, of course, we're really excited to dig into all of the happenings surrounding the cannabis industry today, but I wanna take a step back and first talk about how you first became interested in everything going on around the cannabis market.

Congressman Ed Perlmutter: It started a long time ago. Colorado, I think we passed the initiative for medical marijuana back in, like, 2000. You know, so Colorado's been kind of on the cutting edge of things for quite a while and it was a topic that would come up from time to time. But when I really became involved was after 2012 when Colorado legalized it. Washington was right after us.

A couple things were occurring at the time. One was a brother-in-law of mine was very sick with melanoma. And the only thing that gave him any relief was cannabis, both just in terms of pain, but also in terms of wanting to eat and keeping it down.

And then a friend of mine had a medical marijuana dispensary and one of his clerks was held up and the muzzle was put in the guy's mouth. You know, just because there's a lot of cash involved in in these transactions, and it piles up over the course of a day or a week. And then finally, when Colorado legalized it, the head of the banking committee at that time, Barney Frank, could see there was gonna be a collision between federal law and state laws as they were evolving, and it would be particularly apparent in the banking sector. So those were sort of three things personal, a friend of mine, and then sort of political and legislative with Barney Frank.

Alex Valvassori: Interesting. Well, I really appreciate that context and before we get into some of, you know, the action we're seeing today around SAFER Banking and, you know, the HHS recommendation, I'm curious as a Colorado resident - how have you seen perception shift over the years, right, from that first, you know, early legalization, the kind of the proper regulatory framework. How have things evolved over the years, both locally in Colorado, but also as you observe things in Congress?

Congressman Ed Perlmutter: Well, so over time, in Colorado, again, we've sort of been on the front end of this thing, but you've seen the people - all the people sort of more and more willing to accept it. We've had a majority here in the state for quite some time, and it's continued to grow and become part of our economy. And so there isn't the stigma that was you know, say existed 20, 30 years ago. Politically, it's been a little different story because, you know, when I started taking this up back in 2013, very much different story in Congress, and really with the administration.

We went to the Obama administration as sort of a first step and said, look, we'd like you to reschedule this thing. And they said, no, we won't reschedule, but we'll say to the justice department and to treasury, these are low priority issues for us. So long as cannabis isn't getting in the hands of kids, the transactions transparent. We don't see any organized crime.

Then we will accept that, but that's as far as we will go, and it became what was called the Cole Memo and the FinCEN guidance. So the administration took a step, which was a pretty substantial but not nearly far enough. And so we then proceeded with what was then called SAFE Banking. Now they've added an R and now it's SAFER Banking, but when I first would suggest bringing it up in committee and I served on the financial services committee, you know, which is insurance, banking, housing, monetary policy, that kind of stuff. I've served on that my 16 years in the congress but when I would bring it up, the subject of cannabis. I got what was called the chuckle factor.

Everybody in the committee - first, they didn't wanna hear about it. And second, they chuckle about it. They say, oh, you're Perlmutter. You're from Colorado - you're a mile high.

And I'd say, look, guys, this is serious business. There's a lot of cash here. There's a public safety element to it. There's an equity element to it so that small businesses, veteran owned businesses, women owned, minority owned businesses have a real shot at beginning and delving into the cannabis industry.

So over time, I was persistent, but the perception changed. And people did realize that there was a lot of cash involved - that there was a major public safety factor because of all of the armed robberies and different kinds of assaults that were occurring, not only in Colorado, but elsewhere, in the country. And then a lot of folks realized that maybe some big business folks could step into the cannabis industry. They didn't really need to have new banking relationship but I think a lot of folks realized that the minority communities, and women owned businesses were sort of getting the short end of the stick.

Alex Valvassori: Yeah. Interesting. And so, you know, thinking back to 2013 and where we are today, what has been the journey of SAFE Banking and, you know, how is that trouble factor kind of disappeared over time? I take it now given what we're seeing that people are taking this much more seriously than they were ten years ago.

Congressman Ed Perlmutter: So, the chuckle factor is gone. Now it still exists here and there, but not certainly in the House of Representatives and now not in the Senate. So we had a Republican chairman. The guy named, Jeb Hensarling, was a friend of mine, but when he was in charge and the Republicans were in charge of the house, they would not allow a hearing in the financial services committee, in the banking committee.

When Democrats won in 2019, Maxine Waters said, okay, Perlmutter, you've been talking about this a long time. Either put up or shut up. And so we provided witnesses, from the banking and credit unions, from the cannabis industry, insurance, you know, from a whole variety of places, including law enforcement, that this was something that needed to be done.

And we were able to get all the Democrats in the committee and half of the Republicans on the committee to support moving the bill forward to then what's called the Rules Committee.

And then at the Rules Committee, we showed everybody that we had a lot of support between among Democrats and Republicans – they came to the House Floor. This was in 2019, and I think virtually every Democrat voted for it and almost half the Republicans supported it. So very big bipartisan vote out of the house, but then it got stuck in the Senate Banking Committee where it's been stuck for five years. So under the Republicans, the bill was considered because they had the majority for the first two years.

Under the Republicans, they said, the bill's too big and it's too broad. Well, then they lost the majority in 2021. And then with the Democrats, the bill was too narrow and too limited. They wanted more.

The Republicans wanted less, but in the house, we felt like we'd hit the happy medium that both opened up the banking system so that legitimate businesses could have legitimate banking services, checking accounts, payroll accounts, deposit accounts, credit cards. It was a combination of both cannabis and some hemp in that particular bill in SAFE Banking. We dealt with some banking issues that were kind of a thorn in everybody's side, but it kept running into this roadblock in Senate banking.

So we kept knocking on the door, kept trying different avenues.

The bill passed the house seven times while I was there, and I retired at the end of last year beginning of this year. My last day in the House of Representatives was January 3rd.

And, started back to practicing law with my law firm, Holland & Knight, on January 4th.

So two big things have happened this year that really within the last month that I think for the cannabis industry.

One, health and human services, Xavier Becerra, secretary of HHS, wrote a letter to the drug enforcement administration, DEA, saying, look, we don't think cannabis should be a Schedule One drug. And so Schedule One drug under the controlled substance act is a drug that is illegal for all purposes. You can't research it. You can't use it. You can't prescribe it. You can't do anything with it. And HHS has suggested to the DEA that they reschedule it from a Schedule One drug to a Schedule Three drug, which has a lot of implications to it because 50 years ago under Richard Nixon was really the last time anything's been done on cannabis, but 50 years ago, it was made illegal. It was made this Schedule One drug.

Now we're at 48 states, that have some level of cannabis use. And so the states have moved forward and the federal government hasn’t. But we got this one big change, which is HHS recommending that it be rescheduled from a Schedule One, totally illegal to Schedule Three. At the same time, the Senate Banking Committee actually took up the bill, which is really the first bill they've taken up of any kind in about five years. And passed it out of that committee, 14 to 9 last week, last Wednesday.

And that is a very big step forward given the roadblock that has occurred in that Senate Banking Committee for five years. So two major steps forward. One, the HHS recommending rescheduling, and two, Senate Banking moving the bill forward from being in committee to the floor of the senate.

Alex Valvassori: Yeah. Interesting. I need, needless to say too, you know, monumental like shifts here. You know, there hasn't been a huge shift like this probably dating back to the Cole Memo being rescinded under Jeff Sessions.

Right? They're really it's been kind of a status, close situation here in the industry. And so I wanna dig into each of those and get your take kind of on what we might expect here moving forward.

So first, on SAFER - I know SAFE Banking was your baby, and I'm curious to know, is SAFER here? Is this the Goldilocks bill that that you think really has the legs to make it through Congress. And how do you see things shaking out? Do you think we'll see a Senate floor vote here before the end of the year?

Congressman Ed Perlmutter: So, you know, Alex, you know, I'm sort of the eternal optimist, but I do think really some big strides have been taken within the last couple weeks, both in the congress and within the administration.

So the senate has modified one section of the bill. And that's really the banking section of the bill. The cannabis and hemp sections of the bill are pretty much are solid. So they represent about 80% of the bill. And there hasn't been much if any change there.

There's been some change in the banking piece of it. There was fear that an agreement that we'd reached between the Democrats and the Republicans in the House really restricted some banking regulators too much. So the Republicans and the Democrats in the Senate - I don't think it affected it that much. We'd worked on it a lot. It's called Operation Choke Point for folks that want to, you know, really get into the weeds so to speak on this subject. But the senators felt they needed to, kind of refine the language and make some changes to it. And that's the section that was modified. I don't think it affects the votes of Democrats in the house or Republicans in the house, but that's where there's been a change.

The language has changed. I think the actual consequences and result of that section are the same, but the senators wanted to modify the language and they did.

Alex Valvassori: With some of those tweaks and changes, do you think there's enough momentum then to see a floor vote in favor of the bill? Or do you worry that this is gonna become a game of amendments once it gets to for?

Congressman Ed Perlmutter: Well, there's going to be a game of amendments because as I said, there hasn't been a banking bill in the Senate, get to the floor of the Senate, in five years.

So there are there's a lot of pent up efforts to make some changes to banking laws. So I think we're gonna see a lot of amendments, but in watching that committee, Steve Daines a Republican, kind of really being a champion of the bill. And Sherrod Brown, as the chairman of the committee, they fended off a lot of amendments that were proposed by Democrats and Republicans during that committee hearing. My guess is they'll do the same on the senate floor, but there will be an effort to make a lot of amendments because this is, like I said, the first time a banking bill has been to the senate floor in ages.

So I do think it's gonna come to the senate floor. Senator Schumer, as the majority leader has said, he's bringing it to the floor. I think we'll see it by the end of this year. There are a lot of other, you know, things competing for time and the senator's attentions but I think, we're gonna see something to the senate floor. I think you're gonna see 60 votes, which is what you need to have something brought to the senate floor. I think you're gonna see that there are 60 votes.

Now whether, you know, it ends up being 60 plus votes that actually vote for the bill, I don't know, but in the past, just counting various senators, we think there are at least 60 votes to support this legislation then moving to the house of representatives.

Jade Champion: We'll be right back to our conversation.

I hope you're enjoying listening to this episode of the Tyler Tech podcast.

The cannabis legalization landscape in the United States has evolved rapidly in recent years.

Government agencies and departments of commerce, health, revenue, and agriculture, not to mention new cannabis regulatory agencies have all been tasked with the complex responsibility of regulating the cannabis industry.

As cannabis legalization transitions from an abstract idea, to a tangible reality, it's crucial for these agencies to establish a comprehensive cannabis licensing system.

Tyler recently released a blog that details the key considerations when establishing a framework for regulating the legal cannabis industry.

You can find it in our show notes.

This blog offers best practices to make sure you're prepared to comply with the law and protect public health and safety.

Now let's get back to the Tyler Tech podcast.

Alex Valvassori: So, speaking of the house then, of course, as you mentioned, the bill in previous iterations passed the house seven times. Of course, the house looks a little different this time around. What do you think the prospects look like in the house?

Congressman Ed Perlmutter: I say again positive. Probably not as good as they've been in the last four years when Democrats were in charge.

They will have to go through what they call the regular course of business or regular order.

And that means that Patrick McHenry, as chairman of the Financial Services Committee, the Republican Chair, the Republican Chair. Maxine Waters is now the ranking member.

So they'll have to have a committee hearing and mark up the bill. Now the bill's been through that committee a bunch. But there are some new people on both sides of the aisle. My guess is, though, Patrick, he's not a supporter of the bill. But he's willing to be an honest broker and say, look, if you go through the right steps and you have the votes where you're supposed to have votes - I'm not gonna get in the way. He was very much, just, you know, honored that word the whole time I was there. The last four or five years, even though he didn't vote for the bill, he didn't throw himself in front of the bill to stop it.

But you still have a challenge.You gotta do a good job in the committee to get it out of the committee. Then it would go to the rules committee. So the rules committee, for those that don't know, is sort of the traffic cop for the House of Representatives.

It's a very lopsided committee in favor of the majority party. And this year, there are 9 Republicans on that committee and 4 Democrats. Last year, there were 9 Democrats and 4 Republicans.

That committee says what the terms of debate will be. What amendments are going to be made in order. And so it's gotta get through the rules committee to come to the floor of the house. And I think that will happen.

Chairman of the committee, a guy named Tom Cole from Oklahoma, has been a supporter of the bill in the past, and the speaker of the house, at least as of today, Kevin McCarthy, has been a supporter of the bill in the past, and I think they will continue to support the legislation.

Now, one of the wrinkles that comes in here is the Republicans have a rule within their caucus, within their conference - their group of Republicans - that they don't want to bring anything to the floor of the house unless at least half of their members support the bill. Now there's no question that at least half of the house, when you take the Democrats and the Republicans together, support the bill.

And in the prior congresses, in the House of Representatives, we had more than two thirds of the house supported SAFE, and I think, you know, will support SAFER.

But there is this wrinkle, and they call it the Hastert Rule that at least half of the Republicans have to support the legislation for it to come to the floor of the house. Now, can McCarthy override that, probably, but will he? I don't know. But it but that's a wrinkle because it's we've always had a few more than half in the last few years. But it's been close. Overall, that a big majority of people between the Democrats and Republicans.

So there's that little wrinkle that, still, you know, can give everybody some heartburn.

Alex Valvassori: Right. Right. Well, it certainly sounds like a lot of excitement ahead for SAFER, and something we'll be tracking closely here. I wanna shift our attention back to the HHS rescheduling recommendation.

Of course, also an equally exciting development here. I think something that advocates have long been waiting for from HHS. Of course, though, the decision now lies with the DEA. And so, I'd be curious to know, first of all, if you have a gut instinct for what the timeline might look like and where do you see the DEA landing on this?

Congressman Ed Perlmutter: Alright. So let's just sort of, talk about the benefits of both SAFE and well, and the change to schedule it because they they're different. All right. So SAFER really allows for normal businesses to have normal banking relationships.

Okay. I mean, it's as simple as that.

But that's important, to get the cash off the streets to allow for you know, new businesses to come into being and to have banking relationships. So that's the banking lending side of things.

Now on the rescheduling, but that really helps in a couple ways significantly.

One for cannabis businesses. It helps them take tax deductions that they haven't been able to take under what's called 280E. So it's a big bump, if you will, in income because you can't take these tax deductions that most businesses are able to take. The cannabis industry hasn't been able to do that.

Secondly, and I think it's of equal importance, if not greater importance, is the ability to do research.

So as I said at the beginning, if something's a Schedule One drug, that means it's illegal for all purposes.

You can't smoke it, you can't sell it, you can't prescribe it, and you can't research it.

So you can't help figure out if there's some way to standardize things. You really can't figure out if there's a real downside medically, emotionally, whatever because you can't research it.

Now cannabis, there's been one place in the country that's authorized under the law to study it, and that's like the University of Mississippi or Mississippi state or something like that, but that's it. Not even the VA can study it.

So it's a big help to reschedule both on taxes and on research. And so I think it's gonna make a very big difference going forward.

Now, the timeline, I think the timeline for both these things probably finished by the summer of next year, you know, so to go through the legislative process, the Senate, the House, the votes, all that stuff, the back and forth - summer next year, maybe earlier, but that's kind of my estimate. Same thing.

The DEA could actually, could it be any time from now until I'd say the summer of next year.

You know, some people have said, well, probably the end of November, end of the year, and that's possible. But I'm guessing it's six to eight months out there. And again, it makes a big difference for these businesses when you know, last couple of years, they've been struggling. And in part because there was a lot of expansion, somewhat oversupply, but I think, it's there's been a, you know, the market shrunk a little bit, but by businesses being able to take tax deductions, they're gonna see, you know, substantial help to the bottom line.

Alex Valvassori: Right. Absolutely. Certainly, all kinds of benefits that that will come with Schedule Three. I'm curious, you know, some observers have said there may be some unknowns or some challenges that could come with Schedule Three. Are there any things that are on your mind, Congressman, that the industry should be thinking about?

Congressman Ed Perlmutter: Not really. I mean, you know, we're kinda comparing it to like ketamine and some other things compared to where it is today and where it would be under a Schedule Three, it's a marked, in my opinion, improvement. But the fear I think of some of the activists, both with the rescheduling and SAFE Banking is that that's where it stops. That there is no, you know, it doesn't move to fully legalized. We don't develop a tax system similar to an alcohol kind of system, you know, where there's sort of federal and state regulation of alcohol and beer and wine.

So I think some people are worried that it just ends there. I don't think it ends there. I think both of these things are icebreakers which over the course of the next few years will result in some regulation that, you know, would be similar. It won't be the same as you see in the alcohol industry, and it would be a much more mature approach to all of this.

Alex Valvassori: Right. Right. Well, certainly a lot to continue to track surrounding the recommendation. We'll be looking to see what DEA does on that front. And, you know, there's one other major topic that I wanted to get into if you have a few more moments, and that is the 2023 Farm Bill and all of the discussions surrounding you know, the intoxicating products that have come out of that.

There's talk of some change this year and needless to say, in states even without well regulated cannabis programs, you can walk into gas stations or other stores, and they have these Delta Eight products.

How do you see that shaking out here over the course of the next couple of months?

Congressman Ed Perlmutter: Well, I think we've seen some of the consequences and repercussions of sort of you know, jamming something in the - I wanna say it was the 2018 Farm Bill. I can't remember exactly which year the Farm Bill was, but really hadn't been vetted to any great degree and it just sort of opened up the hemp industry, which is fine. I mean, obviously, I got a chunk in, say, banking is dedicated to hemp.

But what happened, and I think one of the reasons that Mitch McConnell is such a stickler and such an obstacle over the last few years when it came to cannabis is that he saw this explosion of kind of unregulated, undisciplined sort of hemp industry.

And he is sort of, you know, said, well, that's not going to happen again. And so he was able, because of a variety of things, to kind of stop the cannabis stuff for moving forward in the senate.

I think we're going to see something in the Farm Bill. Obviously, it's a big bill. The Republicans are gonna have to get their house in order in the House of Representatives for them to pass that, pass of the Defense Bill, pass appropriations.

But there will be some effort to standardize and have the FDA, I think, is probably the most logic agency to really take a much bigger role in trying to deal with hemp to deal with, you know, the products, the byproducts of the hemp, the THC levels in the hemp. And try to, you know, have a little more structure to what's really kind of a wild west, you know, approach that's been taken here. So yes. I think there'll be something in the farm bill.

I think the FDA is probably going to get a much bigger role than they've had in the past, but might be a different agency. I don't know, but I think that's probably the most logical place for it - for them to take on a bigger role.

Now, is the FDA equipped to do it? They're gonna have to get some additional support because you know, it's got a lot of responsibilities, a lot of public safety things come through the FDA, and a lot of people would say they're overworked now and things don't come out quickly enough.

So that'll be sort of one of the things that we gotta consider that the members, I still talk about it as if I'm in Congress. I'm not in Congress. I'm glad I'm not in Congress, but members of Congress will have to consider staffing that agency appropriately so that it can do all of the studies and work that it needs to do to make sure these products are safe that they're that people know what they're getting.

Alex Valvassori: Well, it sounds like a lot of moving pieces on the hemp side. And so it’ll be interesting to see what happens there. Thank you Congressman. We’re so grateful for all the time you've provided today. Before we go, I have just one last question for you.

I think you and I are both optimists, especially as it relates to some of this progress here. So suppose we get to next summer. Right? And we're fortunate to live in a world where cannabis has been rescheduled to schedule three.

We have SAFER Banking on the books. What's next? As you think to the next three, five, even ten years, what do you see Congress doing as we look to the the future of the cannabis industry?

Congressman Ed Perlmutter: Well, I don't want to get too far ahead of ourselves, but I think you'll see something like what's called the States Act. So Cory Gardner, who's the senator from Colorado and I were part of a panel last week at a conference in Chicago.

And Cory was always the sponsor of what's called the States Act, but basically if cannabis or hemp or whatever, anything with THC was legal within a certain state, then that state could, you know, move forward with its own regulations.

I see the federal government coming in, as I said kind of with this approach, that would be similar to alcohol, to wines and beers, so that there is both a federal overlay and a state overlay to the regulation of cannabis, of hemp, so that people know what they're getting. There's some level of standardization and safety attached to it. And so I think that's what's really what we’re looking at over a three to five year process is kind of a federal taxing regime. I think we're going to see a federal research approach. I think we're going to see states still play a big role in the overall regulation of particular businesses within their borders.

So there's a lot of things coming up, but I don't wanna – look, I am very much an optimist. I very much think that there's gonna be some real steps forward.

But unless until that happens and unless until, you know, people who support these steps make sure that Congress does its work, that the administration and the DEA do their work, I don't want to get too far ahead of ourselves.

Alex Valvassori: Well, it certainly is an exciting time for the industry, and I'm really excited to see here what transpires over the course of the next year. Congressman, thank you so much for joining us here today and for everything you've done to advocate for the industry.

Congressman Ed Perlmutter: Alex, thank you very much. Take it easy.

Jade Champion: Are you looking to learn more about the topics discussed today? Check out the show notes for more resources on cannabis regulations and solutions.

Thanks again to Alex and Congressman Perlmutter for sharing their conversation with us. I hope you found it to be informative.

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