A group opposed to the legalization of marijuana is targeting a financial agreement between Wells Fargo and the state of Maryland. This arrangement enables state officials to collect and manage tax revenue from cannabis businesses operating legally within the state. The advocacy group is denouncing this arrangement as “a deliberate move to shield banks engaged in federal law violations” and is endeavoring to inform federal authorities about it. In response, the state maintains that it is “in adherence to relevant laws and regulations.”
Prohibitionist Groups’ Allegations
Smart Approaches to Marijuana (SAM), an organization opposing marijuana legalization, issued these allegations in a press release at the end of last month in response to media reports about the banking arrangement. The group also urged Wells Fargo to stop working with Maryland state officials to break federal laws and regulations in an open letter written to Maryland officials and Wells Fargo, along with copies to other federal officials. Erek L. Barron, the U.S. attorney for Maryland, would be in charge of any prospective federal charges in the state. Attorney General Merrick Garland and Treasury Secretary Janet Yellen were notable receivers of the letter.
In a prepared statement, SAM’s President and CEO, Kevin Sabet, expressed deep concern about the situation, describing it as “a slippery slope that should deeply trouble Marylanders.” He said, “By permitting banking access for marijuana revenues associated with a rising drug use and addiction crisis, Maryland is inadvertently enabling banks to profit from the sale of other illegal substances.”
Maryland’s Response and Wells Fargo’s Reply:
The catalyst for this dispute can be traced back to comments made in the previous month by Rob Scheerer, who serves as the director of the Maryland Office of the Comptroller’s Revenue Administration Division. Speaking at a conference attended by county government officials, Scheerer remarked that, to safeguard the interests of banks, they refrained from categorizing cannabis as such on tax returns. Instead, they employed a clever nomenclature, labeling it as ‘A sale subject to the 9 percent rate under Senate Bill 516 of 2023,’ a reference to the legislation that legalized and regulated marijuana sales in the state.
Following the publication of Scheerer’s comments, the state Comptroller’s Office issued the following statement via email:
“Under Maryland law, the Comptroller’s Office is in charge of collecting sales and use taxes on all taxable goods and services in the state, including adult-use cannabis, which was approved by the Maryland legislature in 2023 and passed by voters in a referendum in November 2022. These laws established the 9% sales and use tax on adult-use cannabis sales.
“Wells Fargo Bank provides lockbox and other treasury management services to the State of Maryland, including services related to collecting state tax revenue. State officials and Wells Fargo have taken all due care to ensure that the Maryland sales and use tax collection and the State’s handling of that tax revenue comply with applicable laws and regulations. Any inference or assertion that these processes have been designed to evade applicable laws or regulations is incorrect.”
Whether state officials have addressed SAM’s open letter remains to be seen. A spokesperson informed Marijuana Moment on Tuesday that the Comptroller’s Office had no further comments.
Regarding Wells Fargo, the company responded to SAM and Sabet’s letter last week, as relayed by spokesperson Gabriel Boehmer to Marijuana Moment. While the full correspondence was not disclosed, Boehmer shared an excerpt from the response:
“Recent media reports that we have been working with the State of Maryland to bank the marijuana industry are false,” it states. “We provide certain services to the State of Maryland related to the State’s tax revenue collection.”
The response also references the earlier statement from the Maryland comptroller’s office.
Federal Legislation and Next Steps:
As of Tuesday, SAM’s executive vice president informed Marijuana Moment that the organization had not yet received a response from Wells Fargo regarding its letter.
It’s important to clarify that neither Marijuana Moment nor Maryland Matters, the initial source of Scheerer’s comments on tax handling, reported that Wells Fargo was directly providing banking services to cannabis businesses themselves.
Due to marijuana’s continued federal illegality, banks and credit unions potentially face penalties from federal banking regulators when collaborating with cannabis businesses. According to the 1970 Banking Secrecy Act, funds linked to federally illegal activities must be reported through a suspicious activity report (SAR). When queried about whether Wells Fargo had submitted SARs concerning Maryland’s cannabis tax revenue, Boehmer declined to provide an official on-the-record response.
Federal legislators have been diligently addressing the banking challenges arising from the state-federal conflict on marijuana through the Secure and Fair Enforcement (SAFE) Banking Act, which was reintroduced in the current legislative session in April. If passed, this legislation would provide a secure haven for banks conducting business with the cannabis industry.
During a recent floor speech on Tuesday, Senate Majority Leader Chuck Schumer (D-NY) reaffirmed his commitment to advancing banking reform as the Senate resumed its session following the August recess. In a Dear Colleague letter circulated the previous week, Schumer highlighted “safeguarding cannabis banking” immediately after “lowering the cost of insulin and prescription drugs” as priorities.
The Senate Banking Committee’s markup is the next step in the marijuana banking bill’s development, and supporters and other interested parties hope it will happen soon.
The U.S. Department of Health and Human Services (HHS) is now suggesting that marijuana be moved from Schedule I to Schedule III under the Controlled Substances Act (CSA), which might give this proposal more support as lawmakers return to Capitol Hill. Such a change would make it possible for cannabis businesses with state licenses to deduct federal taxes.
Before the break in late July, Schumer held a press conference where he expressed optimism about the bill’s bipartisan talks and predicted a very active autumn Senate session. He underlined that the measure has constantly been his major priority, saying there is still a lot to be done by them upon their return.
Bottom Line
The clash between the anti-legalization group SAM, Wells Fargo, and Maryland officials underscores the ongoing complexities and legal ambiguities surrounding cannabis in the United States. While SAM raises concerns about potential federal law violations, Maryland maintains its adherence to applicable regulations. The push for federal banking reform through the SAFE Banking Act gains momentum as Senate Majority Leader Chuck Schumer reaffirms his commitment, and the recommendation by the U.S. Department of Health and Human Services to reschedule marijuana to a lower classification further supports this cause. As these discussions continue, the cannabis industry and its financial relationships remain in flux, awaiting potential legislative resolutions that could impact its future. (Full Story)