First appeared in Associated Press
Medical marijuana is legal in 17 states, but the industry
has a decidedly black-market aspect - it's mostly cash-only.
Banks won't touch pot money. The drug is illegal under
federal law, and processing transactions or investments with pot money puts
federally insured banks at risk of drug-racketeering charges.
In Colorado, state lawmakers are attempting an end-run
around the federal ban with a bill that would create the nation's first state
cooperative financial institution for dispensaries and growers to allow them to
store and borrow money.
The proposal, if enacted, would be a direct challenge to the
U.S. Justice Department, which warns that all financial transactions involving
pot money are illegal.
But for Colorado's 600 or so medical marijuana dispensaries,
and hundreds more growers and associated industry workers, the problem of not
being able to bank marijuana money is big enough to make the challenge
worthwhile.
"I've been kicked out of three banks," said
Matthew Huron, owner of two dispensaries and an edible marijuana company in
Denver. One of his shops, Good Chemistry, greets patients with a sign on the
register, "CASH ONLY."
Huron pays his bills with money orders. Huron's current
bank, which he won't name, doesn't know the true source of his company's
deposits. But without a checking account, Huron said he wouldn't be able to pay
the required payroll tax for his 15 employees.
Small business loans are also out of the question, Huron
said. In order to build a warehouse to grow the marijuana he sells - a
requirement under Colorado law - Huron had to grow pot during construction and
sell the pot to make cash payments to finish the warehouse.
"It's very cumbersome, the banking aspect," Huron
said.
Cumbersome and dangerous. Dispensary robberies are rare, but
the Denver-based Medical Marijuana Industry Group, which supports the
legislation, reports that its members complain of being followed home with some
saying they have been victims of robberies they haven't reported..
Marijuana businesses have large amounts of cash on their
premises, a fact as widely known as the price of the product they sell.
"It freaks everybody out," said James Laws,
general manager at the Good Chemistry pot shop in Denver. "It's
off-putting when people come in and we have to say, 'Sorry, our ATM's down so
you need to go down the street and get cash or we can't help you.'"
The bill up for debate in the state Senate Finance Committee
Tuesday would set up a financial institution somewhat like a credit union.
Only licensed members of Colorado's medical marijuana
industry, or their patients, could join. Initially, the Medical Marijuana
Financial Cooperative would simply function as a vault of sorts for pot money.
Members could deposit money and take money out.
Eventually, the cooperative could decide whether to issue
loans or provide other banking services.
Several Democrats in Congress, including Colorado Rep. Jared
Polis, have proposed federal legislation opening financial services for medical
marijuana businesses in states where they're legal. However, prospects are
remote.
"The truth is, this is just not something that's going
to be addressed in this Congress," said Steve Fox, director of public
affairs for the Washington-based National Cannabis Association.
Without federal action, Colorado's proposal may be a big
waste of time. The same reason banks won't touch pot money - the risk of
federal drug-laundering charges - would confront a state cooperative, as well.
"This bill attempts to address this big problem for the
industry, the lack of financial services. But what it cannot do is get around
the federal money-laundering piece of this," said Sam Kamin, a law
professor at the University of Denver who follows marijuana regulations.
Threat of federal intervention appears to be growing.
American Express announced last May it would no longer handle medical marijuana-related
transactions because of fear of federal prosecution.
A month later, U.S. Deputy Attorney General James M. Cole
gave banks an explicit directive about pot.
"Those who engage in transactions involving the
proceeds of such activity may also be in violation of federal money laundering
statutes and other federal financing laws," Cole wrote in a memo.
Cole's memo spooked the few small banks still doing business
with marijuana growers and sellers.
"You'd have one bank at a time saying, 'We're going to
pull out of this.' Then everybody would go to the next bank, and the next bank,
until all the banks pretty much shut down," Fox said.
The sponsors of Colorado's bill concede that a state
cooperative is unlikely to solve the problem.
But in a state with the nation's most regulated pot
industry, where the government oversees nearly every aspect of how the drug is
grown and sold, they say a banking proposal is the logical next step. Medical
marijuana in Colorado produces about $20 million a year in state and local
taxes, and employs from 5,000 to 10,000 people, according to the industry
group.
"It's really hard to try to figure out how to create a
workable local solution here," said Democratic Sen. Pat Steadman of
Denver, one of the sponsors of Colorado's bill. "We have zero confidence
that Congress is going to do something. But no matter how creative you try to
get, there's only so much you can do at the state level."
So why bother? Steadman has several dispensaries in his
district and says he worries about their safety if something isn't done to help
them bank.
"They've got bags of pot, bags of cash. It's a bad
combination," Steadman said.
