A plan to allow marijuana businesses to work with financial institutions was revived by Colorado lawmakers and passed the state legislature this month.
The bill would let pot providers join to build banking co-ops. It would be the first state-run financial cooperative system for the marijuana industry in the country.
But most banking services require approval by the Federal Reserve, and that isn’t likely – putting the effectiveness of the legislation in doubt.
The bill cleared a final vote in the legislature May 7. It now goes to the desk of Gov. John Hickenlooper for his signature.
Early in May the bill appeared dead after a committee of the state House amended it to call for more study. But it was revived and went on to clear both the House and the state Senate.
The banking problem is especially acute for weed providers in Colorado. Cultivators, processors, and retail sellers of marijuana – both medical and recreational – cannot use banks because federal law prohibits financial institutions from doing business with anyone committing a federal crime.
Colorado voters legalized marijuana for recreational purposes in 2012, but it remains illegal under federal law.
The lack of access to banking creates a dangerous situation for marijuana providers. Without credit or checking accounts, they’re forced to deal strictly in cash. This invites robberies and forces them to use heavy security.
State Rep. Jonathan Singer, who sponsored the bill, said the co-ops would reduce that risk and make legal weed safer for everyone.
“This is the final piece to our pot puzzle,” Singer said.
Under the bill, the cooperatives would operate without FDIC insurance requirements, similar to credit unions. Colorado’s financial services commission would oversee the co-ops.
Colorado now allows cannabis for both recreational and medical uses. Washington State also legalized weed in 2012. Another 27 states have adopted some form of medical marijuana. Banking access is a critical issue in many of these states.
Last year the Obama administration announced it wouldn’t interfere with states that legalize or the businesses that provide legal pot. Earlier this year the Justice Department released guidelines designed to help banks work with marijuana providers.
But bankers have roundly refused to follow the suggestions. Until federal law itself is changed, they say, they won’t risk exposing themselves to prosecution for aiding the commission of a crime.
Time will tell how much the new policy will help ease the situation in Colorado – and whether it will present a model for other states. In all likelihood, the need for reform to federal law will continue.