Bank access crucial to legal marijuana businesses

The retail marijuana market is coming above ground. Four states – Alaska, Colorado, Oregon, and Washington – regulate and tax commercial cannabis production and retail sales. In two of these states, Colorado and Washington, marijuana sales have yielded approximately $350 million in new tax revenue over the past year.

But this newly emerging economy is about to get significantly bigger. Voters in five additional states – Arizona, California, Maine, Massachusetts, and Nevada – will be deciding on similar measures this Election Day. If voters in just one of these states, California, say ‘yes’ to legalization (and the latest polls indicate that they will), then cannabis commerce will become a key component of the world’s sixth largest economy.

{mosads}There remains one catch. Virtually none of the players in this lucrative industry can legally obtain a bank account, process a credit card, or take a standard business deduction on their federal taxes. That is because federal law continues to treat all marijuana-related endeavors as criminal enterprises, including those commercial activities that are licensed and legally regulated under state laws. In short, federal lawmakers are mandating that this multi-billion dollar industry operate on a cash-only basis – an environment that makes businesses more susceptible to theft and more difficult to audit. For an industry seeking legitimacy and requiring transparency, Congressional recalcitrance remains a primary but unnecessary roadblock.

Legislative fixes are available. But so far, Congressional leadership has largely ignored them. For example, House and Senate legislation, ‘The Marijuana Business Access to Banking Act,’ has failed to yield so much as a hearing in either chamber (despite possessing some 47 co-sponsors, including Senate Minority Leader Harry Reid). Passage of the act would provide “a safe harbor for depository institutions providing financial services” with state-compliant cannabis enterprises.

On two occasions, members of the Senate Appropriations Committee have approved an amendment, sponsored by Rep. Jeff Merkley of Oregon, to prohibit federal banking regulators from taking punitive actions against institutions for providing financial services to state-licensed cannabis businesses. But House members have yet to engage in any serious discussion of these measures.

The highly publicized release of federal banking guidelines by the Obama administration in 2014 has also failed to adequately address the situation. According to an Oct. 31 Bloomberg news wire story, more than 97 percent of all federally regulated banks and credit unions refuse to do business with any entities involved in the marijuana industry.

In order to truly bring the marijuana industry out of the shadows, actions need to be taken to amend these outdated and discriminatory federal practices. No industry can operate safely, transparently, or effectively without access to banks or other financial institutions and it is self-evident that this industry, and those consumers that are served by it, will remain severely hampered without better access to credit and financing. Ultimately, Congress must amend federal policy so that these growing numbers of state-compliant businesses, and the millions of Americans who patronize them, are no longer subject to policies that needlessly place them in harm’s way. Cannabis businesses ought to be held to the same standards as other commercial enterprises.

Armentano is the Deputy Director of NORML — the National Organization for the Reform of Marijuana Laws and he is an advisor for Freedom Leaf. He is the co-author of the book, “Marijuana Is Safer: So Why Are We Driving People to Drink?” (Cheslea Green, 2013). He is the author of the book, The Citizen’s Guide to State-By- State Marijuana Laws (Whitman Press, 2015).

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