Pub. 13 2018-2019 Issue 5

NEBRASKA BANKERS ASSOCIATION 13 and Finance has already issued an Informed Investor Advisory titled “Marijuana-Related Investments: Greener Pastures or Just Another Scam?” Bankers should be aware of this risk for a variety of reasons, not the least of which is to be able to help their customers caught up in a scam or to help them avoid the scam in the first place. Banks Have an Important Role to Play for This Sector of the Business Community Due to the unreconciled conflict between federal and state cannabis laws, our government has left this sector of the business community in a very difficult position. While we wait to see if the law will play catch-up, it is not surprising that some of the most risk averse among us (bankers and lawyers included) might prefer to avoid sticking our necks out too far. When the Colorado Bar Association first consideredwhether lawyers could represent clients engaged inmarijuana related activities whichwere lawful under state but not federal law, it advised: “Colorado is one of a handful of states conducting an experiment in democracy: the gradual decriminalizing of marijuana. The Committee notes that, as a consequence of [the ethics rules as currently] writ- ten, Colorado risks conducting this experiment either without the help of its lawyers or by putting its lawyers in jeopardy of violating its rules of professional conduct.” 13 The same, if not more, could be said about the role of bankers in society. Bankers more than anybody understand the problems associated with a business being unbanked, let alone an entire sector of the busi- ness community. Businesses and society generally benefit from the discipline and rigor that banks bring to business operations. Faced with the reality of cannabis businesses operating in our society, it is fair to ask whether it is best for these businesses to be banked rather than unbanked. Hemp The 2018 Farm Bill removed hemp from the definition of marijuana in the federal Controlled Substances Act. 14 Does that mean Nebraska farmers may now grow industrial hemp? The short answer is no, at least not immediately. The 2018 FarmBill removed hemp from the Controlled Substances Act, but also di- rected the Secretary of U.S. Department of Agriculture (USDA) to publish regulations applicable to production of hemp, either allowing USDA approval of plans submitted by individual states or Indian tribes or for the USDA to directly regulate hemp pro- duction in states not submitting a plan. 15 Provisions in the 2014 Farm Bill allowing states to establish hemp research programs will remain in effect until one year after the USDA issues the regulations to control hemp production in states not submitting a plan. 16 Legislation passed in Nebraska after the 2014 Farm Bill limited production of hemp to “postsecondary institutions or the [Nebraska] Department of Agriculture.” 17 This will remain in effect until the Nebraska Unicameral changes it or the USDA regulations for direct USDA control are in place. Conclusion The purpose of this article is neither to advocate for the legality of cannabis nor to suggest that bankers should bank cannabis-related businesses. Broadly speaking (beyond the confines of Nebraska at least), cannabis is here, it appears to be here to stay and it seems likely that Nebraska will slowly evolve its approach to cannabis. Bankers should of course retain the For more information, contact Bryan Handlos or David Bracht at Kutak Rock LLP: (402) 346 6000 or Bryan.Handlos@ KutakRock.com or David.Bracht@ KutakRock.com. Bryan, a member of Kutak Rock LLP’s banking practice group, concentrates on bank regulatory matters. David, a member of Kutak Rock LLP’s corporate practice group, concentrates on agriculture related issues. 1 See https://en.wikipedia.org/wiki/Legality_of_cannabis_by_U.S._ jurisdiction. 2 See FinCEN’s Marijuana Banking Update (based on data through September 30, 2018); https://www.fincen.gov/sites/default/files/shared/ Marijuana_Banking_Update_September_2018.pdf. 3 For example, despite the fact that (alcohol) Prohibition ended many decades ago, there may still be 18 million people in the United States who live in dry counties. See “Dry Counties of the United States” at https:// www.worldatlas.com/articles/dry-counties-of-the-united-states.html. 4 According to the Omaha World-Herald, polling has shown that 77% of Nebraska voters would support a medical marijuana constitutional amendment. 5 21 U.S.C. § 812. 6 See 18 U.S.C. § 1956(a)(1). 7 See the so-called Ogden and Cole Memos. David W. Ogden, Deputy Att’y Gen., Memorandum for Selected United States Attorneys: Investigations and Prosecutions in States Authorizing the Medical Use of Marijuana (Oct. 19, 2009); James M. Cole, Deputy Att’y Gen., Memorandum for United States Attorneys: Guidance Regarding the Ogden Memo in Jurisdictions Seeking to Authorize Marijuana for Medical Use (June 29, 2011); James M. Cole, Deputy Att'y Gen., Memorandum for All United States Attorneys: Guidance Regarding Marijuana Enforcement (Aug. 29, 2013); James M. Cole, Deputy Att’y Gen., Memorandum for All United States Attorneys: Guidance Regarding Marijuana Related Financial Crimes (Feb. 14, 2014); and Monty Wilkinson, Director of the Executive Office for U.S. Att’ys, Policy Statement Regarding Marijuana Issues in Indian Country (Oct. 28, 2014). All of this previous guidance was revoked by Attorney General Sessions in 2018. Although some first reactions to that revocation were worrisome, the industry appears to have largely settled down to its former state of cold comfort with prosecutorial priorities. 8 The so-called Rohrabacher-Blumenauer Amendment. 9 See FIN-2014-G001, BSA Expectations Regarding Marijuana-Related Businesses. Among other things, FinCEN’s expectations include the filing of three types of marijuana SAR filings. 10 See FIN-2014-G001, footnote 7. 11 The Nebraska Attorney General recently reminded law enforcement that CBD products remain illegal in Nebraska (CBD products are popular for their purported therapeutic benefits and, due to their low or nonexistent THC content, do not get users high). 12 See https://americascashcrop.com (“This first-ever national event on cannabis will explain everything, including: How cannabis could become our next $1 trillion industry. Every step to full legalization. How the average American can profit from this explosive phenomenon. The next market-doubling event. Stocks primed to create a new generation of marijuana millionaires. How you can become a cannabis angel investor. And much, much more . . .”). 13 Colorado Bar Association Ethics Committee, Formal Opinion 125 (October 21, 2013). 14 H.R. 2 – Agriculture Improvement Act of 2018, H.R. 2, 115th Cong. § 12619 (2018). 15 Id. § 10113. 16 Id. § 7605. 17 Neb. Rev. Stat. § 2-5701. freedom to bank the customers they choose. Even if they choose not to bank cannabis businesses, bankers will probably find it more and more difficult not to be impacted by cannabis-related businesses in some way. For some bankers, the impacts may be and remain small. For others, particularly banks operating in a multistate environment or in metropolitan areas or those with significant competitors, it is likely that they will need to become more conversant with this rapidly growing industry. Ideally, bankers will find a way to gain knowledge and expertise in this area in a manner that is intentional and not simply the result of lessons learned from multiple costly mistakes. 