Texas Hemp Growers

5904 S. Cooper St Ste 104-104

Arlington, TX 76017
817-948-0371

Commissioner Sid Miller

Texas Department of Agriculture
1700 N. Congress, 11th Floor
Austin, TX 78701

RE: Financial regulations could disrupt Texas’ hemp aspirations

Dear Honorable Commissioner Sid Miller,

Thank you for your strong support of hemp farming and H.B. 1325 during the 86th Legislative Session.
Texas is well-positioned to be a global leader in this emerging industry, and the industry looks to you for
guidance as it grows.

I’m writing you on behalf of Texas Hemp Growers, an upcoming professional association of farmers,
manufacturers and retailers of hemp and hemp products. I would like to bring to your attention a
challenge that could impede farmers’ willingness to adopt hemp as a crop.

We believe, as the state’s Agriculture Commissioner, you can send the appropriate letters to the right
regulators and senators, and influence solutions for the following challenge.

Under current federal laws, banks and credit unions are refusing and withdrawing critical banking and
financial services from state-legal cannabis businesses. This includes hemp farmers and businesses
transacting in hemp byproducts. [1]

This reality impacted many businesses when, in May, Elavon Merchant Services, a subsidiary of U.S.
Bank, withdrew credit card processing services for all merchants involved in cannabis or hemp-related
transactions. Hit particularly hard – and still suffering -- are those retailers who sell 100% hemp-derived
[2]
CBD oil.

Hemp grown for personal care products, food products, and CBD oil -- which requires a different farming
process than hemp grown for textile/industrial purposes -- will be the single biggest commercial market
for this crop in America in 2020. [3] This is because, as you’re aware, the processing and manufacturing
connections still have a few years to catchup before textile hemp is a profitable crop for farmers. [4]

But today, farmers wishing to grow hemp will find it difficult to even open a bank account. As it stands,
no major banking institution will open an account for hemp-related businesses.

This challenge was made clear in a letter penned on June 21 by the American Banking Association (ABA)
to federal financial regulators. [1]

“..the lingering confusion over the legal status of hemp is frustrating the congressional intent of the 2018
Farm Bill by restricting access to financing, credit products, and traditional banking services for this
fledgling industry…

“Currently, banks are uncertain about what steps they can take under existing requirements and many
are hesitant to proceed, believing that the only suitable way to address any risk is to not bank these
businesses, despite Congressional intent.”
 Texas Hemp Growers
5904 S. Cooper St Ste 104-104
Arlington, TX 76017
817-948-0371

Restricted access to financial services will discourage the retailing of hemp byproducts. Unless
regulators act soon, this could have a negative downline effect on the hemp biomass market. Without
enough retailers to sell the products, to whom will the farmers sell their biomass?

There are two solutions to address this challenge:

1. Federal regulators can release a written statement clarifying hemp’s legal status for financial
institutions

The quickest option to clear up this issue is to compel financial regulators to release the formal written
statement specifically requested in ABA’s June 21 letter:

“…a formalized statement from the agencies is necessary to enable banking services for the hemp
industry on a meaningful scale.” [1]

The agencies addressed in ABA’s letter are the Board of Governors of the Federal Reserve System; the
Comptroller of the Currency; the Federal Deposit Insurance Corporation; and the Financial Crimes
Enforcement Network (FinCEN). All relevant contact details are in the last page of this letter.

We would ask your office to consider sending a letter to each of the same financial regulators. We
would ask you to reassure these regulators that Texas does not consider hemp a controlled substance.
We’d further ask you to point out that our farmers and retailers need these regulators to clear the air
quickly for banking institutions, so that the industry can move ahead with confidence.

We believe a formal statement from an esteemed Texas official would go a long way in convincing
financial regulators to move ahead with writing and releasing a statement of clarity.

2. Congress can pass the SAFE Banking Act (S.1200) [5]

A more permanent option would be to convince Congress to pass the SAFE Banking Act. This bipartisan
[6] [7]
bill, supported by the ABA and industry leaders , would also help solve these financial challenges.

As it stands, the SAFE Banking Act is sitting in the Senate Committee on Banking, Housing, and Urban
Affairs. It has already passed the House.

However, it appears Republican senators on the committee may be balking at this bill [8]; not realizing
that it affects the hemp industry, as well.

We would ask your office to consider sending a formal letter of support of the SAFE Banking Act to the
senators on the committee, as well as our two Texas senators, and encourage them to move this bill to
the floor for what will hopefully be a successful vote.

If their concern is the bill’s effects on marijuana, then we would ask that they narrow the scope down to
only cover hemp, so that this issue may be cleared up for banking institutions.

Again, we’re reaching out to you because we believe hearing from a strong, Republican leader is needed
for our senators to understand the significance of the SAFE Banking Act and its effects on the hemp
industry.
 Texas Hemp Growers
5904 S. Cooper St Ste 104-104
Arlington, TX 76017
817-948-0371

We’re concerned for the farmers and businesses who may find themselves in a dangerous situation if
forced to carry large amounts of cash on-hand or off-shore processing services. [6] We believe sensible
reforms and guidance by the appropriate regulatory bodies is needed to create an environment that
invites growth in this new industry. We share ABA’s sentiment that such actions would reap immediate
public safety, tax and regulatory benefits.

Sincerely,
Zack Maxwell, President

Works Cited
[1] V. O'Neill, "ABA Letters to Congress / Regulators," 21 June 2019. [Online]. Available:
https://www.aba.com/Advocacy/LetterstoCongress/Documents/regulators-hemp-062119.pdf. [Accessed 31 July 2019].

[2] N. Thomas, "Hemp companies left looking for banking alternatives," 15 April 2019. [Online]. Available:
https://hempindustrydaily.com/hemp-companies-left-looking-for-banking-alternatives/. [Accessed 31 July 2019].

[3] Congressional Research Service, "crsreports.congress.gov," 21 June 2019. [Online]. Available:

https://crsreports.congress.gov/product/pdf/IF/IF10391. [Accessed 31 July 2019].

[4] Congressional Research Service, "Congressional Research Service Reports," 9 July 2018. [Online]. Available:
https://crsreports.congress.gov/product/pdf/RL/RL32725#page=10. [Accessed 31 July 2019].

[5] J. (.-O. Sen. Merkley, "S.1200 - Secure and Fair Enforcement Banking Act of 2019," 116th Congress, 11 April 2019. [Online].
Available: https://www.congress.gov/bill/116th-congress/senate-bill/1200/. [Accessed 31 July 2019].

[6] B. Bernstein, "ABA Urges Cannabis Banking Reform in Senate Banking Testimony," American Banking Association, 23 July
2019. [Online]. Available: https://www.aba.com/Press/Pages/072319CannabisTestimony.aspx. [Accessed 31 July 2019].

[7] "Challenges for Cannabis and Banking: Outside Perspectives," U.S. Senate Committee on Banking, Housing, and Urban
Affairs, 23 July 2019. [Online]. Available: https://www.banking.senate.gov/hearings/challenges-for-cannabis-and-banking-
outside-perspectives. [Accessed 31 July 2019].

[8] A. LaVito, "Senate cannabis hearing shows challenges to rewriting pot laws despite growing support in Congress," CNBC, 23
July 2019. [Online]. Available: https://www.cnbc.com/2019/07/23/senate-cannabis-hearing-shows-challenges-to-rewriting-
pot-laws-despite-support.html. [Accessed 31 July 2019].
 Texas Hemp Growers
5904 S. Cooper St Ste 104-104
Arlington, TX 76017
817-948-0371

Financial Regulators for Option 1:

The Honorable Randal K. Quarles The Honorable Joseph M. Otting

Vice Chairman for Supervision Comptroller of the Currency
Board of Governors of the Federal Reserve System 400 7th Street, SW
Eccles Board Building Washington, DC 20219
20th and C Street, NW
Washington, DC 20219

The Honorable Jelena McWilliams The Honorable Kenneth A. Blanco

Chairman Director
Federal Deposit Insurance Corporation Financial Crimes Enforcement Network
550 17th Street, NW 2070 Chain Bridge Road
Washington, DC 20429 Vienna, VA 22182

State Senators on the Committee on Banking, Housing, and Urban Affairs:

Brown Sherrod D OH 503 Hart Senate Office Building Washington DC 20510

Cortez Masto Catherine D NV 516 Hart Senate Office Building Washington DC 20510
Cotton Tom R AR 326 Russell Senate Office Building Washington DC 20510
Cramer Kevin R ND 400 Russell Senate Office Building Washington DC 20510
Crapo Mike R ID 239 Dirksen Senate Office Building Washington DC 20510
Jones Doug D AL 330 Hart Senate Office Building Washington DC 20510
Kennedy John R LA 416 Russell Senate Office Building Washington DC 20510
McSally Martha R AZ 404 Russell Senate Office Building Washington DC 20510
Menendez Robert D NJ 528 Hart Senate Office Building Washington DC 20510
Moran Jerry R KS 521 Dirksen Senate Office Building Washington DC 20510
Perdue David R GA 455 Russell Senate Office Building Washington DC 20510
Reed Jack D RI 728 Hart Senate Office Building Washington DC 20510
Rounds Mike R SD 502 Hart Senate Office Building Washington DC 20510
Sasse Ben R NE 107 Russell Senate Office Building Washington DC 20510
Schatz Brian D HI 722 Hart Senate Office Building Washington DC 20510
Scott Tim R SC 104 Hart Senate Office Building Washington DC 20510
Shelby Richard C. R AL 304 Russell Senate Office Building Washington DC 20510
Sinema Kyrsten D AZ 317 Hart Senate Office Building Washington DC 20510
Smith Tina D MN 720 Hart Senate Office Building Washington DC 20510
Tester Jon D MT 311 Hart Senate Office Building Washington DC 20510
Tillis Thom R NC 113 Dirksen Senate Office Building Washington DC 20510
Toomey Patrick J. R PA 248 Russell Senate Office Building Washington DC 20510
Van Hollen Chris D MD 110 Hart Senate Office Building Washington DC 20510
Warner Mark R. D VA 703 Hart Senate Office Building Washington DC 20510
Warren Elizabeth D MA 309 Hart Senate Office Building Washington DC 20510