Colorado lawmakers have approved the world’s first financial system for the marijuana industry, a network of uninsured cooperatives designed to give pot businesses a way to access basic banking services.
The plan, approved Wednesday, seeks to move the marijuana industry away from its cash-only roots. Banks routinely reject pot businesses for even basic services such as checking accounts because they fear running afoul of federal law, which considers marijuana and its proceeds illegal.
The result: Pot shop owners deal in large amounts of cash, which makes them targets for criminals. Or they try to find ways around the problem, like drenching their proceeds in air freshener to remove the stink of marijuana and try to fool traditional banks into accepting their money.
“This is our main problem: Financial services for marijuana businesses,” said Sen. David Balmer, R-Centennial. “We are trying to improvise and come up with something in Colorado to give marijuana business some opportunity, so they do not have to store large amounts of cash.”
Colorado became the first state to allow recreational pot sales, which started Jan. 1. Washington state will follow suit, with retail sales expect to start in July.
The U.S. Treasury Department said in February that banks could serve the marijuana industry under certain conditions. With the industry emerging from the underground, states want to track marijuana sales and collect taxes. It’s a lot easier to do that when the businesses have bank accounts.
But most banks have shrugged at the Treasury guidelines, calling them too onerous to accept marijuana-related clients. The result is a marijuana industry that still relies largely on cash, a safety risk for operators and a concern for Colorado’s pot regulators.
“This is not something that we can wait for any further,” said another banking sponsor, Rep. Jonathan Singer, D-Longmont.
The legislation would allow marijuana businesses to pool money in cooperatives that would take effect only if the U.S. Federal Reserve agrees to allow them to access payment systems.
Democratic Gov. John Hickenlooper supports the pot bank plan and is expected to sign it into law, though a spokesman said Wednesday the governor had yet to review the final language.
Lawmakers from both parties supported the banking co-ops as a way to properly audit marijuana shops and to make sure they’re paying all their taxes. Dispensary owners came to the Capitol this session to tell of their difficulties paying taxes and utilities in cash and the dangers of dealing in cash.
“It is very easy to see somebody get killed over this issue,” Marijuana Industry Group Director Michael Elliott testified last month.
The plan had bipartisan support, though some Republicans said that the effort won’t pass federal muster.
A few banks are accepting marijuana clients in light of the federal regulations.
Numerica Credit Union in eastern Washington state is accepting limited business from marijuana growers and processors, The Spokesman-Review reported Wednesday.
Colorado pot shop owners say a small number of credit unions will do business with them, too, though no banks or credit unions have said so publicly.
Countries that don’t ban marijuana don’t have banking systems unique to the drug.