Financial institutions that either serve, or seek to serve, marijuana-related businesses face significant uncertainty with respect to marijuana’s legal status under state and federal law. As sections of the cannabis industry seek to migrate from black markets to legal markets due to changes in state law, the legalization of marijuana is expected to generate substantial value for industry business owners and the economy. Thus far, financial institutions have been slow to serve the growing legal marijuana industry, but the tide may be turning. On the heels of positive guidance issued by both the Department of Justice (“DOJ”) and the Financial Crimes Enforcement Network (“FinCEN”), some financial institutions appear willing to dip their toes into the growing pool of small business customers operating in the marijuana industry.
As of September 2015, twenty-three states and the District of Columbia have legalized some form of marijuana.[1] Colorado alone has approximately 1,200 licensed marijuana businesses, and there are an estimated 2,000 medical dispensaries and retail shops throughout the United States.[2] These businesses are expected to generate at least $10 billion in economic value in 2015, and another $30 billion each year for state and local economies by 2019.[3] Despite this remarkable growth, marijuana remains a controlled substance under federal law and federal regulations have generally prohibited financial institutions from serving the industry. As a result, many financial institutions are hesitant to extend even the most basic financial products and services to those in state-legalized marijuana markets. This has left many small business owners without access to cash management resources, checking accounts, merchant and payroll services, remote deposit, bill payment, and Automated Clearing House (“ACH”) credit transfers.
Earlier this year, access to these financial products and services seemed inevitable for Colorado business owners, as state banking officials approved a charter for Denver-based Fourth Corner Credit Union—the first credit union seeking to provide financial services specifically for the cannabis and hemp industry. However, the Federal Reserve’s recent refusal to approve its master account application and the National Credit Union Administration’s (“NCUA”) denial of federal share insurance has slowed that forward momentum. Proposed federal legislation has also remained relatively stagnant,[4] and financial institutions are left to weigh the current risk of enforcement with the potential reward of acquiring new customers and accounts from a blossoming industry.
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