Cannabis and Banking: The Standoff Continues

Cannabis and banking

The cannabis industry continues to skyrocket, while increasing numbers of U.S. States eliminate the prohibitive legislature that holds the public back from this popular herb; and that holds States’ coffers back from the taxes the industry generates. Yet, in spite of the inexorable forward march of the cannabis industry, the Federal government continues to make it near impossible for U.S. banks to do business with cannabis enterprises.

“The federal illegality of cannabis has made banks, credit unions, and other financial firms shy away from cannabis companies, out of concerns that they could open themselves up to federal prosecution,” reports an article on

As a direct consequence of the Federal government’s unfounded stance on cannabis, most cannabis businesses have been forced to operate almost entirely in cash. And it’s this circumstance that leaves cannabis enterprises, their employees, and the communities in which they are located vulnerable to crime.

Sam Kamin, the Vicente Sederberg Professor of Marijuana Law and Policy at the University of Denver’s Sturm College of Law, recently lended his voice to the outcry of the cannabis community: “Whether you’re for or against legalization, everyone agrees it’s terrible to have this multi-billion-dollar, cash-only business. You want to be able to see the money, know where the money goes, have a paper trail. Everyone agrees on that: the businesses, the regulators, law enforcement. But we’re years and years into this experiment and we’re not there yet.”

While positive steps are taken in certain quarters, in others, there seem to be endless roadblocks and obstacles.

The State of Cannabis Banking

According to a report by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), which was released this summer, nearly 450 banks and credit unions in the United States were “actively banking” marijuana businesses. This was up from 340 at the start of the Trump Administration in January 2017.

Last month, September 2018, the GFA Federal Credit Union, which was set-up 80 years ago for the purpose of serving French-Canadian immigrants, expressed its intention to begin catering to the needs of Massachusetts-based recreational cannabis companies as of October this year.

In an interview with the Boston Globe, GFA’s President and CEO Tina Sbrega said: “We’re looking at a cannabis business as a legitimate business that wants to be recognized as such and that, without banking services, presents a tremendous public safety issue in our communities. Otherwise, you’re talking millions and millions of dollars of cash on the street.”

But state and federal legislators remain an obstacle and Sam Kamin of the University of Denver is doubtful that GFA’s mission will be a success: “It’s possible these folks have the secret sauce that will make that work, but I’d be surprised,” he said. “The person that figures it out can make a lot of money. I’ve been pitched scores of ideas, everything from bitcoin to state charters to savings and loans. Nothing so far has broken this logjam.”

California Proposes State-Chartered Banks for Cannabis

In August, California state senator Bob Hertzberg proposed that a state-chartered bank be established for California’s recently legalized recreational cannabis industry. Of course, the proposal would not (and could not) protect such state-chartered banks from Federal law enforcement. Earlier, in June, the House and Senate Appropriations Committees rejected measures that would have offered this protection to financial institutions in states that have legalized cannabis.

The goal of Hertzberg’s proposal would be to concentrate “cannabis business assets into one or several easily identifiable institutions” and, in doing so, remove cannabis cash from the streets.

“We’ve got barrels of cash buried all over the state, businesses being ransacked and it’s clear that the federal government won’t act,” said Sen. Bob Hertzberg to the Los Angeles Times. “It’s a shock to me that the state government may not act this year either.”

Cannabis and Banking: Legal Obstacles and the Threat of Federal Prosecution

Mark Goldfogel, who helped to launch what was intended to be Colorado’s first cannabis friendly bank (the Fourth Corner Credit Union) knows all about the legal obstacles: “The federal government is very effective with a letter,” he said. “They don’t need to go to court. One letter to a financial institution saying, hey, we don’t like what you’re doing, is more than enough for a financial institution to weigh the risks against the rewards and to pull out of the industry.”

The threat of federal prosecution, together with the exhausting legal struggles have been very successful in discouraging most banks, credit unions, and other financial institutions from participating in cannabis. And even though the industry continues to smash records and gain acceptance from the public, the Federal government ignores the voice of the people, the voice of reason, and the voice of scientific research in favour of prohibition.

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