Weed dispensaries in Colorado have initiated a battle to get business funding for their industry so that they no longer have to live in danger of being “cash only” establishments. Despite paying taxes, the cannabis industry is still limited by decisions made by the U.S Federal Reserve Bank of Kansas City.
A Federal Blockade Against Marijuana Business Funding
The Fourth Corner Credit Union was established in Colorado in order to allow legal dispensaries to use the U.S. banking system for financial services and business funding. However, restrictions continue to dog the fledgling institution, with credit still being denied and a blockade against receiving deposits. The Federal Reserve Bank has refused to issue the Fourth Corner Credit Union a master account and corresponding routing number which prohibits the bank from being able to financially or electronically deal with other banks. In short, the Fourth Corner Credit Union has been de-clawed at the outset.
The reasoning behind the Federal Reserve Bank’s decision to restrict the Fourth Corner Credit Union from access to the nation’s fiscal system is simply that they believe it is too dangerous to support the marijuana industry. Marijuana is still federally considered a Schedule 1 drug, a distinction that supposes it is a more dangerous drug than cocaine. This classification finds the Federal Reserve Bank refusing to cater to the financial needs and funding for businesses that risk condoning a federally illegal drug, despite marijuana’s legalization at the state level in Colorado, District of Columbia, Washington, Alaska and Oregon.
Sympathy in the Face of a Hard Ruling
The most recent developments come courtesy of U.S. District Judge R. Brooke Jackson who presided over a 2-hour long hearing on Monday in Denver regarding the confusion surrounding a system that seems to encourage with one breath while denying with the next. Ultimately, Judge Jackson is not inclined to issue an injunction to the Federal Reserve Bank forcing them to issue a master account to the Fourth Corner Credit Union because he is unable to change federal law. However, he verbally expressed sympathy to marijuana businesses being faced with contradictory regulations, saying that if he was a member of Congress he’d vote in favor of allowing marijuana banking. Since he is not a member of Congress, his responsibility at its core is to uphold federal law.
Contradictory Messages for Weed Dispensaries
In February of 2014, the Department of the Treasury issued a memorandum stating “Because federal law prohibits the distribution and sale of marijuana, financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity.” However, state legalization has resulted in a contradiction in which weed dispensaries and other marijuana-related businesses are considered legal. These legal businesses are confused when they discover the doors to the Federal Reserve Bank locked tightly.
Simultaneously in February 2014, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network released a statement saying that “financial institutions can provide services to marijuana-related businesses in a manner consistent with their obligations to know their customers and to report possible criminal activity…this would promote greater financial transparency in the marijuana industry and mitigate the dangers associated with conducting an all-cash business.”
The president and CEO of the Consumer Bankers Association fired back that, until Congress changes federal law to allow the sale and distribution of marijuana, banks will be “highly reluctant to participate in this new type of ‘commerce’”.
Judge Jackson has put forth that despite the Federal Reserve Bank’s refusal of federal banking and business funding for weed dispensaries and marijuana companies, proceeds from marijuana sales are already knowingly going into the nation’s banking system due to the state of Colorado’s use of Wells Fargo to process taxes. While Judge Jackson has no deadline to reach a concluding ruling in this case, he has expressed that he feels the decision would be better made by Congress.