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.

5 replies on “Ask a Pot Lawyer”

  1. The problem with the above perspective is that it than takes the argument of money laundering and turns it into international drug trafficking. The industry certainly has not received a green light, but the yellow guidance put forward as been pretty clear about keeping the state experiments in cannabis within the state boarders.

  2. The parallel company would be charted specifically as a company to provide financial services to the corresponding dispensary. No product leaves the country, and all financial accounting will be conducted accurately, so there will be no laundering or international trafficking. The real word of caution, is that most banks in the United States and even internationally, hold merely 6% of deposits in cash, and have lent the other 94% mostly to entities which have used the funds to purchase oil futures. There will be people going to prison; bankers and brokers.

  4. http://www.thefourthcornercreditunion.com

    Cannabis Industry executive Mark Goldfogel has been named Executive Vice President for Industry Relations at the Denver-based 4th Corner Credit Union, the first open source of banking services for the legalized cannabis industry.

    Goldfogel was a founder of C4EverSystems, a cash handling kiosk set up to meet banking compliance guidelines for cannabis transactions, and was a co-founder of MJ Freeway, the popular point of sale software for cannabis businesses. He has also held management positions at ADP and John Deere, and is also a regular contributor to CBE Press.

    In a statement about his new position, Goldfogel said:

    I may be the first marijuana executive in history to accept a position in banking.

    http://www.cannabisbusinessexecutive.com/2…

  5. You need to raise cash. And stuff your mattress. That is right, you need to get ALL the cash you possibly can out of the financial system.

    That is ALL banks,

    credit unions,

    mutual funds, stock funds, retirement account, annuities, and life insurance policies. You need to do this nice ans legal like.

    Now, if you’ve got millions or you’ve got thousands, you need to get as much cash as you can in The First National Bank of your Mattress.

    How much of your money do you think your bank has? Try 6 cents on the dollar. Before bankruptcy costs. Imagine your pension gone, your mutual fund closed, your money market account frozen. Imagine everything you have worked for and your savings gone, gone, gone.

    http://nickguarino.com/

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