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The Ticking Time Bomb That is Marijuana Banking

Here’s a question I never hear anyone asking: How long will it be before the Cannabis Industry’s banking halts the growth of the industry?

I started thinking about this while reading a recent story from Government Technology (their tagline is, “Solutions for State and Local Government”) titled Why Marijuana Businesses Still Can’t Get Bank Accounts.

It’s a sobering, in-depth look that details what you already know — that the Federal government’s ongoing prohibition against marijuana, despite growing state-driven legalization, is creating a banking crisis for marijuana businesses.

You know the problem: It’s handling all that cash, and the lack of access to full-service bank accounts. And the cash problem isn’t just one for marijuana retailers; state’s and local municipalities aren’t set up to handle large tax payments in cash, either.

It’s a mess that will only get bigger as more states legalize cannabis.

As the story notes:

About 40 percent of Colorado cannabis businesses lack bank accounts altogether, according to the office of U.S. Rep. Ed Perlmutter, a Democrat who has pushed to improve banking for the cannabis industry. State officials would not comment on that number.

(Andrew) Freedman, Colorado’s director of marijuana coordination, said a growing number of marijuana businesses seem to be obtaining bank accounts, judging by the declining share of tax revenue that businesses are paying in cash. But the services they’re able to access are limited and costly — “which means a lot of people prefer to keep as much as they can in cash,” he said.

All the cash floating around makes cannabis businesses targets for crime, Freedman says. Since Colorado fully legalized marijuana in January 2014, the Denver Police Department has logged over 200 burglaries at marijuana businesses, as well as shoplifting and other crimes.

The loose cash also makes it harder for the state to track businesses’ finances to make sure they are obeying the law and paying their taxes. And in order to get a bank account, some businesses will funnel their cash through a shell company. “It starts to look a lot like money laundering.”

Yes, when it comes to marijuana banking, it’s a mess. And that’s why the actions of four U.S. Senators last week give a little bit of hope that this problem might have a chance of getting resolved sooner rather than later.

Four Democratic U.S. senators from Washington, Colorado and Oregon (where recreational marijuana is legal), have asked Federal regulators to clarify how lenders can help finance the Cannabis Industry and still comply with Federal law so that companies in states that permit pot sales don’t have to run their businesses solely on cash.

According to Bloomberg News, “Many marijuana-related businesses are experiencing difficulty accessing financial services and must operate all-cash operations,” Senators Jeff Merkley and Ron Wyden of Oregon, Patty Murray from Washington and Michael Bennet from Colorado wrote in a letter to six U.S. regulators. “Without clearer guidance from all federal regulators to provide certainty in the regulatory environment, most banks and credit unions are still not serving marijuana-related clients.”

What’s interesting about this is that the legislators making the biggest push to open up banking to the Cannabis Industry are the ones from the states with full legalization — in other words, those states bringing in the most in marijuana taxes.

But what these Senators need to do now is to get their fellow federal legislators from states that are close to going fully legal for cannabis on board before they have a tax problem in their states, too.

For example, U.S. Sen. Dianne Feinstein of California should jump on the cannabis banking bandwagon soon, because it is increasingly likely that the Golden State’s voters will approve full legalization in November.

If that happens, the banking issues on all sides will multiply dramatically.

So, what’s it going to take to get Congress and the Federal government to pull their heads out of the ground and come up with a solution to this growing banking issue?

Maybe it’s as simple as California voting for full legalization, but here’s hoping somebody with some clout in Washington wakes up and gets on this problem before that, because it is a ticking time bomb ready to go off when we least expect it.

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