Reefer Relief

Public banks may finally provide a solution for marijuana industry banking

A salient solution to dispensaries' cash-only conundrum has surfaced in California. State-owned banks may be the answer to finally allowing marijuana businesses to open bank accounts.

One of the industry's major issues with pedaling a product still not legitimately recognized by the federal government is that banking like a regular businesses is out of the question. That's because most banks are regulated by the Federal Reserve.

While not expressly forbidden, banks have a regulatory responsibility to keep a close on eye its clients to make sure their financial affairs are on the up and up. That includes keeping an eye out for money laundering, sales to minors and cross-border sales.

If the feds find something shady going on with a marijuana business, and the bank doesn't catch it, they could have to answer for their oversight. Not to mention the Department of Justice can still enforce federal law at will in regards to marijuana—a distinct possibility, especially in today's political setting.

All that adds up to a big "no thank you" from the vast majority of banks. Many online anecdotes tell of banks not only flat-out denying accounts, but even closing the personal accounts of those associated with the marijuana industry.

Credit unions have stepped in to provide some relief, but the services are limited and still leave marijuana businesses with plenty of cash-only transactions, as even credit card companies are leery of marijuana money.

Credit unions must also still apply for charters under the National Credit Union Administration and adhere to various national regulations, creating the same difficulties national banks bear.

Even businesses serving the marijuana industry are at risk without even touching a bud.

As a result, marijuana businesses are dealing with hundreds of thousands, sometimes millions, of dollars in cash every year—and security is an issue.

Heinous crimes and robberies victimizing marijuana business operators spurred citizen groups to brainstorm ways to address the issues. Some of these groups have helped support the idea of state-regulated banks.

States in which marijuana is legal must worry about tax collection as well. Tax collection offices will see marijuana businesses pay their dues in hundreds of thousands of dollars in cash. This has led to security concerns at collection offices as well.

But if the buck stopped with the state, then banks wouldn't have to worry about violating some overbearing federal law and losing their license. State-regulated banks would be much more likely to open accounts for marijuana and marijuana-related businesses.

The states could offer their own insurance and regulations under their own laws, which include legal marijuana, providing much of the same service as national banks. Taxes could be paid with ease.

Of course, some issue will remain, such as using federal wire services in transferring money, but businesses stand to gain much more in the way of security.

With all roads leading back to the ubiquitous federal government, bringing banking under state and local jurisdictions may just be the solution the marijuana industry needs for now.