For me, the end of Cannabis prohibition was inevitable from the moment it stopped my nausea when no pharmaceutical could. Ending prohibition has become my mission ever since.
So, how will prohibition end? It seems that the final straw to the end of prohibition comes from a banking loophole created 33 years ago.
In 2014, the Colorado Legislature voted to allow a credit union to form to service state legal Cannabis, thereby paving the way for sellers and growers of this federally illegal drug to deposit their earnings, and,operate like any other business. Those of us that have followed the industry knew this was a shallow and unfulfillable permission because credit unions are similar to banks and are federally regulated
Yes, Cannabis is a Schedule 1 Federally illegal drug and no state permission is going to change that.
But one sentence in one document written 33 years ago punches a hole in the wall of Cannabis prohibition – and it is likely that hole that can’t be closed. According to section 201 of the “Federal Credit Union Act”, 12 U.S.C. sec. 1781, the 1981 law reads, in part: “No credit union shall be granted a charter by the commissioner unless such credit union has applied for (National Credit Union Administration, or NCUA) insurance on its shares and deposits.”
The key word is applied, my friends, not granted. The Fourth Corner Credit Union in Colorado was created to allow dispensaries the ability to deposit and bank their money. By putting all of their eggs in this basket, they have no “normal” customers at risk when it comes time to fighting the Federal prohibition on providing banking for what is now a legal state industry.
Everyone knew the Federal government would drag their feet on providing insurance, and as it turns out, credit unions don’t need to have been granted the NCUA insurance; they only need to have applied for it.
While it seems like a technicality, it might very well be the technicality that allows for open bank deposits in this industry. And once cash can be openly converted from a Cannabis transaction to an ACH (automated clearing house) transaction, the last hurdle for Cannabis prohibition will be overcome.
In the interim, the credit union can have private insurance for deposits, theft and other potentials risks. As long as they don’t loan the money out, or perform other banking activities that would require Federal insurance, they are free to open deposits for dispensaries and allow dispensary money to be turned into ACH funds. In essence, they would finally be allowing open banking for the industry.
This allows dispensaries to run like any other business, and it effectively ends the last battle keeping Cannabis businesses from being accepted like any other business.
And one more thing: By allowing one credit union the ability to openly take deposits, this paves the way for the entire industry to be accepted.
The Fourth Corner Credit Union has announced that they will begin taking deposits as early as January 2015. This ends the last major hurdle in establishing Cannabis as an industry and opens the floodgates for the more than $2.6 billion in 2014 state legal transactions to be taxed, regulated and – finally! — banked.
About the Author
Mark Goldfogelis a founder of C4EverSystems, acash handling kiosk guaranteed 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, guaranteed to meet government compliance regulations for cannabis. He held management positions at ADP and John Deere. You can reach him at [email protected]