Senators’ Letter on Pot Won’t Sway Card Networks, But Could Parry Sessions’s Thrust

The efforts of 18 U.S. senators to persuade the Senate Appropriations Committee to honor state laws for legal cannabis are not expected to sway Visa Inc. and Mastercard Inc. to drop their prohibitions on marijuana-related purchases over their networks.

Earlier this week, a group spearheaded by Sens. Michael Bennett (D) and Cory Gardner (R), both of Colorado, sent a letter to the Appropriations Committee in rebuttal of Attorney General Jeff Sessions’s decision in January to rescind an Obama-era document called the Cole Memo, which allowed marijuana merchants in states where the drug is legal to operate without federal interference, provided they adhere to the memo’s guidelines.

The senators are asking the committee to “alleviate the turbulence the Attorney General’s abrupt decision has caused,” and that it help “preserve the strong regulatory frameworks the states have created” regarding the sale and oversight of legal marijuana. All 18 senators signing the letter hail from states that have legalized marijuana.

Sessions’ move heightened fears among payments providers servicing state-legal marijuana merchants and their sponsor banks that the Justice Department would aggressively enforce the federal government’s prohibition on cannabis and shut down the bank accounts of marijuana merchants.

Visa and Mastercard cite adherence to federal law, which classifies marijuana as an illegal Schedule 1 drug, for their prohibition. Mastercard, however, says it continues to monitor the situation, seek guidance from regulators, and inform merchant acquirers of new developments.

“Without the support of sponsoring or acquiring banks, which settle credit card transactions, there will be no change (in Visa’s and Mastercard’s position),” says Lance Ott, president of Bankcard Brokers, a Vancouver, Wash.-based independent sales organization and board member for the Washington D.C.-based National Cannabis Industry Association. “Ultimately, the decision to allow credit card transactions lies with the sponsor banks, as they are members of the card associations, and they determine which industries to support.”

The senators’ letter goes on to ask the committee to help them craft “precise language that will preserve state laws regarding marijuana legislation until we can establish a longer-term framework.”

The Rohrabacher–Farr amendment, an omnibus spending bill passed in 2014, prohibits the Justice Department from spending funds to impede states’ medical-cannabis laws. The legislation, however, does not change the legal status of cannabis at the federal level and must be renewed each fiscal year. Prospects for renewal of the legislation, which expires in late March, became questionable when Sessions rescinded the Cole Memo.

Efforts to link federal spending to recognition of state cannabis laws is considered an effective and powerful strategy, says Michael Correia, director, government relations, for the Washington D.C.-based National Cannabis Industry Association.

“The Cole Memo was just guidance, a piece of paper that could be rescinded,” Correia says. “Language in appropriations bills is law, although just for that budget cycle.”

Even though the framework for the 2018 fiscal-year budget has been worked out by Congress, it is still up to the Appropriations Committee to approve actual funding. Lobbying the committee to recognize state marijuana laws is a way to introduce legislation during the government’s funding process that otherwise might not fly on its own, says Correia. Congress has until March 23 to finalize the budget.

While there is no telling how the committee will respond to the senators’ request, several committee members hail from states that have legalized marijuana. “That bodes well for honoring state laws regarding legalized cannabis,” says Ken Berke, president of PayQwick, a Calabasas, Calif.-based provider of a closed-loop payment system for marijuana merchants. PayQwick services 300 marijuana merchants across Washington, Oregon, Arizona, and Alaska.

The best thing marijuana merchants can do for now is to remain compliant with state law and the guidelines laid out in the Cole Memo, Berke says. That way, he adds, local U.S. Attorneys will remain inclined to leave compliant cannabis businesses alone, and instead pursue businesses that violate the Cole Memo.