Legal marijuana businesses in the country are poised to get a “yellow light” into banking rights from the Departments of Justice and Treasury. Although slow moving, marijuana is becoming more accepted and marijuana businesses are yearning for widespread legitimacy. Allowing them to conduct themselves like any other “legitimate” business is another strong step toward that sought-after acceptance.
The announcement was made yesterday by Colorado Gov. John Hickenlooper’s (D) chief legal counsel Jack Finlaw. Obtaining a “yellow light” means that marijuana businesses would be entitled to basic banking rights.
Because pot is still federally illegal, marijuana businesses can’t have bank accounts, and banks can get busted for money laundering if they accept deposits from marijuana businesses. This causes the marijuana industry to be nearly all-cash, which causes concern for marijuana business owners.
Seattle-based marijuana shop owner John Davis was rejected by his bank because of illegal deposits despite trying to be very quiet and inconspicuous. Davis said having large sums of cash makes you a “target.” Then he received a severance letter from his bank.
“After a thorough assessment and evaluation, it is with deep regret that [we] will cease offering banking services for medical marijuana/cannabis businesses and/or facilities,” stated the letter.
Earlier this year, marijuana business owners wondered if they would ever be able to operate fully like a business. That hope has been delivered in Finlaw’s announcement.
“What we’re being told, is probably in the first quarter of 2014 there will be some guidance issued that’s comparable to the Cole memo from the Department of Justice that will give, maybe not a green light, but a yellow light to banks to allow them to do business [with marijuana businesses] — to take deposits, to set up checking accounts, to set up small business loans, to allow these businesses to accept purchases through debit cards or credit cards, to allow what normal businesses are allowed to do,” said Finlaw.
Marijuana businesses would still be under oversight upon receiving a “yellow light” to make sure the businesses aren’t illegal fronts. This guidance would be very similar those outlined in the Cole memo released in August after the federal government said it wouldn’t file suit against legal-pot states.
The Cole memo stated that marijuana businesses in legal-pot states may operate provided that no revenue goes to criminal organizations, aren’t fronts for illegal acts, or sell to minors, along with five other priorities. Any person or group that fails to abide by the provided guidance will be subject to “federal enforcement action, based on the circumstances.”
As a result of continuous deregulation, the marijuana market has been quickly growing. This year, legal marijuana sales reached almost $1.5 billion and are expected to increase next year to about $2.34 billion. Expected expansion is so large that investors are wanting a part of this emerging industry.
“Cannabis is one of the fastest-growing industries,” said former Wells Fargo managing director Steve Berg. “Domestically, we weren’t able to find any market that is growing as quickly. . . More and more investors are coming in and financing these businesses.”
However, banks are still wanting to be careful about the “yellow light.” But allowing marijuana businesses into banking would offer more credibility to legal pot and, not to mention, actually be a smart financial move for the banks for a change.
Joshua de Leon is a writer and researcher with Ring of Fire.
