Legal Pot’s Cash Conundrum

  • by Sabrina Fendrick March 6, 2014

    pot_shopOn Sunday February 16th, I bought legal weed for the first time from a recreational cannabis store in Denver, Co.  I spent a few minutes speaking with some of the employees, as I was eager to hear how things were going under this newly sanctioned marijuana market.  Unsurprisingly, business was great.  Some items were selling quicker than others, but everyone was in agreement that the rollout of Colorado’s legal cannabis retail system had been a great success, except for one crucial component that was as unsettling as it was expected – we were standing in one of a few dozen high profile stores, well-known for having excessive amounts of cash on hand (in the first week of sales, businesses generated $5 million in cash-only transactions) and no where to put it, because the banks won’t take it.

    Clearly, denying these pot stores the ability to safely deposit their earnings poses an imminent threat to public safety.  These shops are easy targets for robbery and assault (as well as other forms of criminal activity), which puts customers and employees at serious risk.  Some of these shop owners are considering banning backpacks or other large bags – others are arming their workers.  Neither of these options are a viable solution.

    This problem isn’t new however, nor is it going unnoticed.  On February 14th, the Department of Treasury released a nonbinding memorandum, in conjunction with the Justice Department stating that banks may consider working with pot retailers without fear of prosecution – so long as they remain in compliance with state laws, and followed other instructions outlined in the memo.  Though a truly historic and progressive action by the federal government’s leading financial regulatory body, these guidelines are largely symbolic, providing no actual legal protection to banks working with cannabis shops.   As such, most financial companies remain skeptical about getting involved with a market existing under so many contradictory laws.

    According to federal law, these banks could technically be found guilty of money laundering (among other offenses) for handling the proceeds of what the US government still considers an illegal drug.  The Colorado Bankers Association rightly notes that the guidance issued by the Department of Justice and the U.S. Treasury “only reinforces and reiterates that banks can be prosecuted for providing accounts to marijuana related businesses.”  The Association further criticizes these new guidelines, stating that “Bankers had expected the guidance to relieve them of the threat of prosecution should they open accounts for marijuana businesses, but the guidance does not do that.  Instead, it reiterates reasons for prosecution and is simply a modified reporting system for banks to use. It imposes a heavy burden on them to know and control their customers’ activities, and those of their customers.”

    Is it any surprise then that these guidelines – which include a multi-tiered labeling structure and a requirement for banks to maintain ‘suspicious activity reports’ – have left many financial institutions with cold feet?  Two of Colorado’s largest banks, Wells Fargo and FirstBank have already announced they won’t work with weed-related enterprises.  In fact, most financial trade associations have widely rejected these latest overtures because there are no tangible, legal policies in place.

    Despite the skepticism held by many federal administration officials and other politicians, the government can and should be doing much more to enable the success of this new, legal market. Unfortunately, many are sitting on their hands, and holding their breath – hoping to quietly ride out this growing wave of support for legalization, which shows no sign of subsiding.  Over 50% of the US population supports a regulated marijuana retail system for adults.

    Its time for these officials to concede to the will of the electorate, and address the legitimate needs of this new industry. Lawmakers now have an opportunity to show true leadership in this changing political landscape by supporting legislation that would give states and businesses the resources necessary to enable a responsible and successful implementation of this new “great experiment.” Specifically, they should get behind the “Marijuana Businesses Access to Banking Act,” introduced by Colorado representative Ed Perlmutter.  This bill (HR 2652), already endorsed by the Colorado Bankers Association, would alter various banking laws to protect banks providing services to marijuana-related businesses from the threat of federal prosecution and other penalties.

    Financial institutions don’t operate off good-faith statements (including non-binding memorandums) – even those from the Department of Treasury, or any other enforcement agency.  They operate under explicit legal authorization.  Only when the laws change will the banks truly be free to provide the services these businesses so desperately need, and their communities rightly deserve.



     Contact your representative today and tell them to support HR 2652

    55 responses to “Legal Pot’s Cash Conundrum”

    1. jimmy says:

      The banking and monetary system are the problem itself.

      Here is how it works, sadly enough:

      The Congress decides it needs money. It makes out an IOU to the Federal Reserve. The Federal Reserve calculates 10% of what Congress wants, then sends that as an electronic transfer request to the Treasury Department.

      The Treasury Department prints that money and gives it to the system of banks, which in turn lends the money out to people or consumers, at interest, from the prime rate all the way up to 29.99% and even beyond.

      The other 90% of what Congress wanted is CREATED this way by charging interest on the citizenry.

      This is called fractional reserve banking. Banks need only hold 10% at maximum to give creedence to their customers that they can confidently return the money deposited.

      What is the national debt? It’s the 10% that the fed sent electronically to the Treasury.

      The Monetary Reform Act would create US NOTES that would end the privilge the FED holds, the privilege of a few men to control the entire country and fuel the world banking cartels (IMF, World Bank, Int’l bank of settlements) that create poverty and instability in the world.

      The national debt would be gone. The military industrial, prohibition industrial complexes would be gone.

      Real war and Drug war, other contrived wars on inanimate objects and arbitrary targets–they create a lot of money for bankers, at the cost of horrible social problems and human rights violations. These are intentional results from the few in control, all of them bankers whose greed exceeds anything normal people could even fathom.

      Screw the banking system. They create panics on whim to create money for themselves. The Great Depression was a man-made event. The Morgans, Carnegies etc. created the FED, which all presidents and the founding fathers warned would end up enslaving the American people.

      It happened. They take 33% of your work wages before you even see them, so you can serve as a guarantor on the debt which. could. be. eliminated. by leaving the fractional reserve system of fiat currency backed by no real value. No more inflation. Reduced taxes.

      The banks will be the downfall of the United States, more than any foreign enemy. This is a real possibility more than any invasion or mass destruction.

      Who is powerful enough to start wars abroad and keep a failed and fraudulent drug war going? Who controlled Nixon the entire time in office, all of it taped by him, which now serves as evidence. The bankers?


      Ditch Chase Bank, it’s run by a Carnegie. I did and it felt great. The bankers are the problem. The monetary system is broken at its core. FULL RESERVE BANKING would eliminate the national debt and inflation.

    2. Stuart R Eairheart says:

      What does it take to start your own bank or credit union with fellow shop owners? I have no idea ,so it may not be an option. The OLD Republican guard.

    3. gimble says:

      Bit coins,customers can purchase bit coins and exchange it for pot!

    4. Galileo Galilei says:

      I’m not sure what a ‘nonbinding memorandum’ is. Who or what is not bound by its declarations.

    5. Dave says:

      I took my pilgrimage (basically x-country) to CO and given the state of many of the neighborhoods the shops in Denver were in- it’s only a matter of time before someone tries a Hollywood movie style heist. The thought definitely occurred to me that political opponents, law enforcement, and anyone benefiting from prohibition can’t wait for this to happen to “prove” that cannibis “brings down the moral foundation” of once thriving and vibrant neighborhoods. These were “ghettos”- and a few of the shops I was in must have brought in $1,000 in cash in the 5 mins or so I spent in them. I can’t see how that is a recipe for anything but disaster and bad ink. Feds need to bite the bullet and admit that they’ve fought a futile and dishonest battle and catch up with the times that have already long passed them. One thing all of these shops had in common- they were all legitimate businesses with good, knowledgeable employees who deserve to feel like they aren’t wearing a giant sign that says “Rob Me” when they come to work until the moment they leave.

      Allowing these business owners to bank may not erase the threat- but it’ll make it less tempting and it’ll make the taxation of these businesses more cut and dry. The people of (2) states have spoken- just like the people of several other states will continue overruling Federal law. The opportunity for a proactive approach by the Feds is presenting itself to reclassify cannibis or nix the “money laundering” threats to banks as the legal movement continues to spread.

    6. bongstar420 says:

      There should be more stores working with lower cash volumes per store and they should be taking fair margins (not to exceed 30% profit for a retail operation).

      Additionally, I don’t believe anyone is stopping these people from setting up their own bank.

    7. Ray Walker Jr. says:

      And we’re back again to the same problem, and that is the current Schedule 1 classification of Cannabis within the CSA. Not one constuctive arument concerning Cannabis ends without coming to this conclusion. I challenge anyone to present any problem about this that can’t be resolved by moving Cannabis to Schedule III or IV.
      Our governments’ perpetual thirst to control every facet of human existant is appalling, and the obvious corrupt futility of it all is only serving to further insult the intelligence of us all.

    8. Mark Smith says:

      Can the government be charged with something as well because they dont mind taking the tax money…….

    9. phrtao says:

      Good point how can a bank possibly know what any business who banks with them is doing or if they are in full compliance with state law. Surely so long as the bank shows best endeavours to co-operate with state law (i.e. checks that a cannabis business is properly registered when the account is opened) there can be no case against them if the business is subsequently shown to be in contravention of the law. Any business that the bank opens an account for (cannabis based or not) could be breaking state or federal law or laundering money without the bank’s knowledge – the banks know this and have the legal clout to defend it in court. They are simply trying to make it hard for these businesses to function but banks cannot resist the money for too long so it will eventually happen.

    10. alex says:

      Jimmy’s comment is ignorant and misinformed… take an economics class before you pretend to know how the economy works. 90% of what you just said is false