The weed business can be a dangerous proposition in Colorado. Under federal law, banks aren’t allowed to do business with pot providers, who must do business strictly in cash. This invites robberies.
Earlier this year the Obama administration introduced a set of rules designed to help banks get around that ban. But the banks refuse to comply, saying they won’t budge until the law itself is changed.
So lawmakers in Colorado pushed a creative solution: Let pot companies build banking co-ops in the state, essentially credit unions without FDIC insurance. The co-ops would still need approval from the U.S. Federal Reserve to provide checking, credit, and other services.
That solution would remove the legal risk to bankers while allowing cannabis cultivators, processors, and sellers to do their jobs without constant fear of attack.
But the proposal died May 1, when a House committee scrubbed it by amending it to say the state would continue studying the problem. Lawmakers on both sides of the aisle said they weren’t ready to act.
“Let’s take some time to have this properly vetted,” said Rep. Kevin Priola, the Republican who sponsored the amendment that killed the bill.
They may be the only ones who aren’t ready for action, aside from Congress. Obama actively encouraged financial institutions to work with cannabis providers, while those providers have pleaded for years that their cash-only model isn’t safe.
“I don’t know whether this will take an act of Congress or an act of God at this point,” said state Rep. Jonathan Singer, the Democrat who sponsored the banking bill.
Still, backers of the proposal acknowledged they had little hope of succeeding. It was a tap dance attempt to legalize marijuana banking without violating federal law – a near impossibility.
“We really do not believe that that will work,” said Don Childers, who heads the Colorado Bankers Association. “It is flatly illegal to deal in any illegal substance or any proceeds therefrom.”
Childers testified that the guidelines issued by the Obama administration actually made banks less likely to work with the weed industry.
Colorado and Washington State both legalized pot in 2012. The first retail marijuana shops opened in Colorado Jan. 1 to brisk business. Washington’s stores are scheduled to open as early as July.
The same lack of access to banking afflicts the cannabis industry in Washington – and in many of the 24 other states that allow medical weed. A concrete plan to open financial institutions to marijuana dollars would save a lot of people a lot of grief.