UNLOCKED POTENTIAL? SMALL BUSINESSES IN THE CANNABIS INDUSTRY HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTEENTH CONGRESS FIRST SESSION HEARING HELD JUNE 19, 2019 Small Business Committee Document Number 116–028 Available via the GPO Website: www.govinfo.gov U.S. GOVERNMENT PUBLISHING OFFICE 36–715 WASHINGTON : 2019 VerDate Mar 15 2010 15:30 Sep 11, 2019 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 F:\DOCS\36715.TXT DEBBIE SBD026 with DISTILLER Congress.#13 HOUSE COMMITTEE ON SMALL BUSINESS NYDIA VELA´ ZQUEZ, New York, Chairwoman ABBY FINKENAUER, Iowa JARED GOLDEN, Maine ANDY KIM, New Jersey JASON CROW, Colorado SHARICE DAVIDS, Kansas JUDY CHU, California MARC VEASEY, Texas DWIGHT EVANS, Pennsylvania BRAD SCHNEIDER, Illinois ADRIANO ESPAILLAT, New York ANTONIO DELGADO, New York CHRISSY HOULAHAN, Pennsylvania ANGIE CRAIG, Minnesota STEVE CHABOT, Ohio, Ranking Member AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member TRENT KELLY, Mississippi TROY BALDERSON, Ohio KEVIN HERN, Oklahoma JIM HAGEDORN, Minnesota PETE STAUBER, Minnesota TIM BURCHETT, Tennessee ROSS SPANO, Florida JOHN JOYCE, Pennsylvania ADAM MINEHARDT, Majority Staff Director MELISSA JUNG, Majority Deputy Staff Director and Chief Counsel KEVIN FITZPATRICK, Staff Director (II) VerDate Mar 15 2010 15:30 Sep 11, 2019 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 F:\DOCS\36715.TXT DEBBIE SBD026 with DISTILLER C O N T E N T S OPENING STATEMENTS Page Hon. Nydia Vela´zquez ............................................................................................. 1 Hon. Steve Chabot ................................................................................................... 2 WITNESSES Ms. Shanita Penny, President of the Board of Directors, Minority Cannabis Business Association, Portland, OR ................................................................... 4 Mr. Eric Goepel, Founder & CEO, Veterans Cannabis Coalition, Walnut, CA .......................................................................................................................... 6 Ms. Dana Chaves, Senior Vice President and Director of Specialty Banking, First Federal Bank, Lake City, FL ..................................................................... 8 Mr. Paul Larkin, John, Barbara, and Victoria Rumpel Senior Legal Research Fellow in the Meese Center for Legal and Judicial Studies, The Heritage Foundation, Washington, DC .............................................................................. 10 APPENDIX Prepared Statements: Ms. Shanita Penny, President of the Board of Directors, Minority Can- nabis Business Association, Portland, OR .................................................. 30 Mr. Eric Goepel, Founder & CEO, Veterans Cannabis Coalition, Walnut, CA ................................................................................................................... 63 Ms. Dana Chaves, Senior Vice President and Director of Specialty Bank- ing, First Federal Bank, Lake City, FL ...................................................... 72 Mr. Paul Larkin, John, Barbara, and Victoria Rumpel Senior Legal Re- search Fellow in the Meese Center for Legal and Judicial Studies, The Heritage Foundation, Washington, DC ............................................... 75 Questions for the Record: None. Answers for the Record: None. Additional Material for the Record: CUNA - Credit Union National Association ................................................... 93 ETA - Electronic Transactions Association .................................................... 94 Florida Department of Agriculture and Consumer Services ......................... 95 Full Spectrum Omega, Inc. .............................................................................. 97 NCIA - National Cannabis Industry Association ........................................... 103 NORML - National Organization for the Reform of Marijuana Laws ......... 105 SARBA - Safe and Responsible Banking Alliance ......................................... 107 Statement of Dan Anglin, Loveland,CO ......................................................... 109 (III) VerDate Mar 15 2010 15:30 Sep 11, 2019 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 0486 F:\DOCS\36715.TXT DEBBIE SBD026 with DISTILLER VerDate Mar 15 2010 15:30 Sep 11, 2019 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 0486 F:\DOCS\36715.TXT DEBBIE SBD026 with DISTILLER UNLOCKED POTENTIAL? SMALL BUSINESSES IN THE CANNABIS INDUSTRY WEDNESDAY, JUNE 19, 2019 HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. The committee met, pursuant to call, at 11:30 a.m., in Room 2360, Rayburn House Office Building. Hon. Nydia Vela´zquez [chairwoman of the Committee] presiding. Present: Representatives Vela´zquez, Finkenauer, Golden, Kim, Crow, Davids, Evans, Schneider, Espaillat, Delgado, Houlahan, Craig, Chabot, Hagedorn, Stauber, Burchett, and Joyce. Chairwoman VELA´ ZQUEZ. Good morning. The committee will come to order. I thank everyone for joining us this morning, and I want to espe- cially thank the witnesses who have traveled from across the coun- try to be here with us today. We are here to draw what I believe is needed attention to an in- dustry that is rapidly evolving. As more and more states take steps to bring cannabis to commerce, we are seeing small businesses at the forefront of this expanding industry. As the only House com- mittee dedicated solely to the needs of small firms, it is important for us to be shedding light on the challenges these small entities face, as well as the economic potential they offer. That is why I have called today’s panel, and I look forward to hearing more from our witnesses and thank them for taking the time to be with us this morning. In recent years, there has been a rapid shift in the legal treat- ment of cannabis, often led by voters at the local and state levels. Today, nearly every American lives in a state where cannabis is de- criminalized to some extent, and legal business activity is per- mitted to certain degrees. This rapid growth of the legal cannabis industry has had a considerable impact on our nation’s broader economy. In 2018, consumer spending in this industry passed $10 billion for the first time, and consumer spending is expected to in- crease to $23 billion by 2022. Investment activity also increased dramatically last year up $13.8 billion in 2018, compared to only $3.6 billion in 2017. Clearly these figures illustrate a market that is ripe for entrepreneurship. Despite growing economic opportunities around legal cannabis, fac- tors like federal law enforcement, conflicting rules among the states, and our current banking regulations are hindering the abil- ity for entrepreneurs and small businesses to fully engage in this new industry. (1) VerDate Mar 15 2010 15:30 Sep 11, 2019 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\DOCS\36715.TXT DEBBIE SBD026 with DISTILLER 2 So today, we will have a chance on this committee, to spark the dialogue over the role of the federal government, and particularly, the Small Business Administration, can plan in supporting entre- preneurs in this sector. By reducing financial barriers to entry in cannabis-related businesses, SBA can play a critical role in offering affordable access to capital and counseling services. That is why I am currently working on legislation that will work to open some of the agency’s programs to businesses in areas where the industry is legal. We know the cannabis industry is quickly evolving but is mired with inconsistent federal and state laws that are creating barriers for small businesses. We are here today to listen to the challenges and opportunities small firms face in this industry. Before I yield to my friend, Ranking Member Chabot, I want to mention that I understand that there are differing views on the le- galization of cannabis. Our committee has had a long history of ap- proaching issues in a thoughtful and constructive way to best rep- resent the interests and concerns of entrepreneurs and small busi- nesses. As the Ranking Member and I always say, there are no Re- publican small businesses nor Democratic small businesses, only American small businesses. And our role on this committee is to fight for them. I encourage everyone to keep that in mind and re- member that we can disagree without being disagreeable. Again, I want to thank the witnesses for being here today, and I now yield to the Ranking Member, Mr. Chabot, for his opening statement. Mr. CHABOT. Thank you, Madam Chairwoman. I would like to thank the witnesses for being here today. And as you look around the room, I would just say that it is clear that there is considerable interest in this topic because the room is packed. And as most people know, we like to think that this is the most bipartisan Committee in Congress. Both Ms. Vela´zquez and I have had the opportunity to lead this Committee over the past several years, and regardless of who is in charge, we have worked together and moved bipartisan legislation together. And as she mentioned, when we disagree, we do it without being disagreeable, usually. Unfortunately, today is one of those times where the philo- sophical divide between our respective perceptions of how we should move forward deviates. But as is our custom, I am confident that we will do so respectfully. Marijuana is the most commonly used illicit drug in the United States. Its use is associated with a range of adverse health effects. Short-term effects include altered senses,