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Why some lawmakers want cannabis companies and casinos to be eligible for coronavirus loans

·Senior Producer and Writer
·6-min read
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On Sunday, the Trump administration announced that the second round of the Paycheck Protection Program had already gone through over half of its $310 billion in funding.

The program administered by the Small Business Administration (SBA) has now given out over half a trillion dollars.

Lawmakers are expected to consider a third round of funding for the program when they negotiate another coronavirus response package in the coming weeks. An issue they will undoubtedly wrestle with are rules that shut off assistance from a range of business.

Policymakers have largely pushed publicly-traded companies — like Shake Shake (SHAK) and Ashford (AINC) — out from the program. Though here are some of the businesses they want to get in.

Legal cannabis companies

Marijuana products remain illegal under federal law although 33 states and the District of Columbia have some form of legalized marijuana. Eleven states have legal recreational marijuana use.

BROOKLYN, NEW YORK  - APRIL 14: A recreational marijuana smoker indulges in smoking weed on April 14, 2020 in the Bushwick section of the Brooklyn borough of New York City. As some smokers turn to smoking weed to ease their stress during the coronavirus pandemic, some doctors are warning that cannabis can cause airway inflammation that could cause complications should a user become a victim of COVID-19. (Photo by Bruce Bennett/Getty Images)
Some cannabis suppliers have reported high demand, especially early in the coronavirus crisis, as customers have stocked up on legal marijuana. (Bruce Bennett/Getty Images)

A group of 10 Democratic Senators and 34 members of the House are looking to help small cannabis businesses that operate legally.

“Workers at state-legal cannabis businesses are no different from workers at any other small business,” the lawmakers wrote in a letter to congressional leadership, adding that they “are sources of economic growth and financial stability for thousands of workers and families, and need our support.”

The legal cannabis industry reportedly supports 243,700 full-time jobs in the U.S. According to a recent report, it had sales of $589.3 million just in December across the states of Arizona, California, Colorado, Oregon and Nevada.

Some lawmakers have also long been pushing a bill before the current COVID-19 crisis to help marijuana businesses with access to banking services.

MIAMI, FLORIDA - JUNE 27: Democratic presidential candidates (L-R) Sen. Bernie Sanders (I-VT), Sen. Kamala Harris (D-CA), Sen. Kirsten Gillibrand (D-NY) and Sen. Michael Bennet (D-CO) take part in the second night of the first Democratic presidential debate on June 27, 2019 in Miami, Florida.  A field of 20 Democratic presidential candidates was split into two groups of 10 for the first debate of the 2020 election, taking place over two nights at Knight Concert Hall of the Adrienne Arsht Center for the Performing Arts of Miami-Dade County, hosted by NBC News, MSNBC, and Telemundo. (Photo by Drew Angerer/Getty Images)
Five former presidential candidates are among the lawmakers in favor of opening up the Paycheck Protection Program to legal cannabis businesses. In addition to Elizabeth Warren (not pictured) they are, from left, Bernie Sanders, Kamala Harris, Kirsten Gillibrand, and Michael Bennet. (Drew Angerer/Getty Images)


SBA regulations specifically exclude businesses “deriving more than one-third of gross annual revenue from legal gambling activities” from getting assistance.

Other groups historically ineligible for SBA loans, such as certain nonprofits, have received special carve outs, but the gaming industry has remained on the outside looking in.

A range of lawmakers from Nevada (where else!) have pushed to change that, noting that “[s]mall businesses in the gaming industry support more than 350,000 jobs in the United States.”

Mark Amodei, a Republican who represents Nevada’s second congressional district, even wrote a letter to Trump saying the issue required the president’s “direct and immediate intervention.”

LAS VEGAS, NV - APRIL 27: Fremont Street Experience at Fremont Street, Downtown Las Vegas is usually a mass of people but currently stands empty and closed due to the Coronavirus (COVID-19) pandemic on April 27, 2020, in Las Vegas, NV. (Photo by Barry Ambrose/Icon Sportswire via Getty Images)
The coronavirus has left casinos - large and small - empty and closed. (Barry Ambrose/Icon Sportswire via Getty Images)

About 206,000 Nevada casino employees are out of work, according to the American Gaming Association. The economic pain has led Nevada officials to push for a rapid re-opening of the state. Las Vegas Mayor Carolyn Goodman, in a viral CNN interview, said “I want everything back” regardless if casinos could ensure customer or worker safety before opening.

Another group excluded from PPP loans are businesses that present “live performances of a prurient sexual nature.” Not surprisingly, lawmakers aren’t clamoring to go to bat for strip clubs but at least two businesses, the Silk Exotic Gentlemen’s Club in Wisconsin and Little Darlings in Michigan, have reportedly decided to sue the SBA and Treasury Secretary Steven Mnuchin to get access to PPP funds.

Lobbyists, another excluded group unlikely to (publicly at least) get cheerleading from lawmakers, are also suing.

Certain nonprofit groups, especially local chambers of commerce

Current rules allow Paycheck Protection loans to a certain type of nonprofit group — so-called 501(c)(3) groups. This classification covers a range of organizations from public charities to private foundations to churches. These group are eligible and have been receiving PPP loans.

Another type of nonprofit — 501(c)(6) groups — are not eligible. Republican Senator Ted Cruz sent a letter to SBA Administrator Jovita Carranza asking for her support to allow these organizations to receive loans.

The Texas Senator is focused specifically on local chambers of commerce, saying they are “an important lifeline on which many small businesses are relying to navigate today’s troubled economic waters.”

US Senator Ted Cruz, Republican of Texas, arrives for a series of votes related to a bill in response to COVID-19, known as coronavirus, at the US Capitol in Washington, DC, March 18, 2020. (Photo by SAUL LOEB / AFP) (Photo by SAUL LOEB/AFP via Getty Images)
Senator Ted Cruz, Republican of Texas, at the US Capitol in March. (SAUL LOEB/AFP via Getty Images)

He adds that many chambers have helped business in their communities “only to be left adrift for their efforts.”

Nonprofits and cultural institutions ‘regardless of size’

A group of New York lawmakers, including Carolyn Maloney and Alexandria Ocasio-Cortez, are pushing on behalf of larger nonprofits and cultural institutions.

These organizations — generally classified as 501(c)(3) groups — are eligible and receiving loans but the lawmakers want bigger organizations to also get access.

The SBA rule, which applies to for-profit and non-profit businesses alike, is that any organization with over 500 employees is not eligible for loans. All part-time and temporary employees are counted in the total.

The members of Congress want to either scrap the 500 employee cap for these non-profit groups or change the rules so that part-time employees are not counted.

The lawmakers’ case for an exception is that these groups are in a position to “alleviate some of the burden on government resources” and that “[r]egardless of size, the needs and realities of nonprofits and cultural institutions on the frontlines are the same.”

There has also been lobbying by lawmakers on behalf of religious organizations amid concerns that churches or other groups might give up some rights if they received federal money. It has led the SBA to publish a special FAQ to underline that “a faith-based organization that receives a loan will retain its independence.”

Payday lenders

A final controversial group are payday lenders who — along with a narrow range of financial institutions — could be eligible for loans. Some lawmakers have written in support of “installment lenders” who they say are being shut out.

US Democratic Representative from California Maxine Waters walks out of the chamber of the US House of Representatives during the debate on the additional 484 billion dollar relief package amid the coronavirus pandemic at the US Capitol in Washington, DC, on April 23, 2020. (Photo by NICHOLAS KAMM / AFP) (Photo by NICHOLAS KAMM/AFP via Getty Images)
Chairwoman Maxine Waters at the U.S. Capitol in April. (NICHOLAS KAMM/AFP via Getty Images)

But California Representative Maxine Waters, the powerful chair of the House Financial Services committee, wants them out of the program. Her letter to Secretary Mnuchin and Administrator Carranza urges them to “reject attempts by predatory companies, including payday and car-title lenders, from having access to PPP loans.”

Waters is also pushing for increased access for Community Development Financial Institutions and Minority Depository Institutions.

The Senate returned to Washington this week to begin the process of considering additional coronavirus response measures. Lawmakers are aiming to hammer out an additional package — known as “phase 4” — in the coming weeks.

Ben Werschkul is a producer for Yahoo Finance in Washington, DC.

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