Though many were initially excited to hear that the State of Colorado approved our nation’s first financial system for the marijuana industry, that excitement seems to be waning because even if Colorado gets some sort of marijuana banking system off the ground, it will be years before any banking becomes a reality for marijuana businesses.
As most of you know, marijuana businesses typically operate on an all-cash basis, making them targets for criminal activity and making transparency exceedingly difficult. Though the United States Department of Treasury issued a memo in February stating that it would allow banks to serve cannabis businesses under certain conditions and rules, hardly few banks have even expressed an interest in servicing the marijuana industry. In response to this lack of banking interest, Colorado decided to take matters into its own hands by trying to develop its own fast-tracked financial system to assist its newly-minted recreational marijuana businesses.
Through House Bill 1398, Colorado’s plan is to establish “a network of uninsured cooperatives designed to give pot businesses a way to access basic banking services.” The bill would allow marijuana businesses to pool money in cooperatives, but these co-ops will only come into being if the U.S. Federal Reserve agrees to allow them to do things like accept credit cards or checks. Sounds fairly simple, right? Wrong.
The details for implementing this bill are vast. The banking industry is heavily regulated and one does not just “get approval” from the U.S. Federal Reserve. Colorado lawmakers now admit that their cooperative banking plans will require at least two more years of preparation, including developing even more State standards and rules. Even that schedule assumes the Federal Reserve will give its blessings to Colorado’s plans, which is a tall order considering that marijuana is still a Schedule I controlled substance making any and all activity associated with it a Federal crime.
Oliver Ireland, a Washington, D.C.-based bank regulatory attorney, hit the nail on the head when he told the Denver Post that “the critical problem is [that] you have money flowing through this (co-op) entity with proceeds of transactions that are still illegal under federal law … Is the Fed going to do what the banks won’t already do? No. Why would they?”
We applaud Colorado for seeking marijuana banking solutions. People in multiple states have voted for legalized medical and recreational marijuana and providing responsible marijuana business owners with the normal tools necessary to survive ought to be part and parcel of fulfilling the voters’ mandate.
The “quick fix” here is for Congress to change our banking laws to ensure that marijuana businesses can access the national banking system. Unfortunately, getting Congress to act on this is just not very likely. This means that we do need state lawmakers to continue trying to resolve the banking problem. We also need individual banks to take to the risk of providing banking services to marijuana businesses. The credit unions in Colorado and Washington that have opted to serve licensed marijuana businesses are a great start, but we need more.
What do you think?