IS IT TRUE THAT POT BUSINESSES still cannot get bank accounts? What do people do?
IT IS MOSTLY TRUE. And people do all sorts of interesting things. The situation feels intractable despite the fact that several banks and credit unions want to work with marijuana businesses and are not shy about saying so. Like most legal hurdles in the marijuana industry, the problem is the illegal status of pot under federal law.
The banking conundrum got press again when Colorado's Fourth Corner Credit Union recently lost its long-shot lawsuit against the Federal Reserve Bank, which refused to grant the state-chartered credit union a "master account" to serve pot clients. Fourth Corner made the usual legal and policy arguments, in and out of court, including that "in 2016, $1.2 billion in cash will be transacted by the cannabis industry in Colorado. That's all in $20 bills. At some point somebody will die. And then we will be allowed to bank."
Most of us anticipated that Fourth Corner would lose. The judge was nice about it, but determined that "courts cannot use equitable powers to issue an order that would facilitate criminal activity." The judge also stated, "I regard the situation as untenable and hope that it will soon be addressed and resolved by Congress." Given President Barack Obama's near lame duck status and a bunch of other factors, I am skeptical this will happen in 2016.
In the meantime, though, it is an open secret that many weed businesses in Oregon, Washington, and Colorado do have bank accounts. Some are with small, state-chartered institutions, like Salal Credit Union in Washington, which my law firm advises on this topic. Another entity, Maps Credit Union, is open to (some) marijuana entities right here in Oregon. These institutions offer very basic and expensive merchant accounts, but they exist.
Many weed businesses have accounts with the big banks, like Wells Fargo and Bank of America, which don't realize they are banking pot money. I have clients who open these accounts discreetly and move from bank to bank whenever they get discovered. And many weed businesses structure themselves with innocuous names to improve their chances at flying under the radar. The alternative is to pay everything in cash and money orders.
The banking situation has resulted in some curious externalities, like the success of security firms servicing the cannabis industry, and a market premium on commercial real estate equipped with safes and vaults (including old banks). Here in Oregon, the department of revenue has begun collecting sales tax on recreational weed sales, so the state will only become more invested in helping marijuana businesses to the extent that it can.
For now, the cannabis industry has developed as far as it can under the current system. Until Congress acts on something—whether that is cannabis tax reform, banking reform, or federal legality in pot-legal states—we will be stuck in neutral. That is great news for armored security firms and pretty much nobody else.