The Cannabis Conundrum

States continue to legalize marijuana, but federal law lags trend.

By Bill Poquette

After the 2018 midterm elections, voters in 33 states have legalized marijuana to some degree, and Michigan in November became the 10th state to allow recreational use. Missouri was one of two states, along with Utah, to give the nod to medical marijuana in the fall balloting.

A few weeks later, the Missouri Bankers Association was holding its annual Executive Management Conference in Kansas City and had fortuitously scheduled as a speaker Don Childears, president and CEO of the Colorado Bankers Association. Childears has struggled on behalf of his members for more than a decade with the issue of banking the cannabis business, which is prohibited by federal law. Coloradoans approved medical marijuana in 2002 and recreational use in 2012.

The cannabis industry generates billions of dollars in transactions and most of it is in cash, Childears noted. But even with legalization by voters and state legislatures, these businesses’ need for safe, secure banking services is frustrated by the threat of severe federal penalties hanging over financial institutions that would otherwise love to accommodate them.

The business is consolidating in Colorado, according to Childears, with small, underfinanced operators being acquired by larger, better-funded enterprises. The commercial potential is vast enough that big tobacco and breweries like Miller Coors are giving it the eye, and private equity is buying up warehouse space and equipment.

So what is a banker to do to take advantage? Congress needs to act on this issue, in Childears’ view. As it is, federal law preempts state law, and without enabling legislation, federal banking agencies are left without power to set rules and regulations or even clear guidance.

U.S. Sens. Lisa Murkowski, R-Alaska, and Jeff Merkley, D.-Ore., have introduced legislation to resolve the conflict, but to little avail so far. Childears is encouraged, however, that in 2014 a cannabis bill passed the U.S. House by a vote of 234-119.

“I think there is a clear majority in Congress to get something done in the near future,” he said.

Indeed, cannabis banking legislation has been moved up to a top priority for the American Bankers Association, according to James Ballentine, the trade group’s executive vice president of congressional relations and political affairs, who followed Childears on the conference program.

“We’re working on a draft we hope will be introduced soon,” he said.

The Murkowski-Merkley bill doesn’t go far enough, in Ballentine’s view. “Every other business that touches the marijuana business — the landlord, the plumber — is not covered.”

Meanwhile, there are 20 banks in Colorado serving cannabis businesses. “They are charging high fees for taking the risk,” Childears said. These banks have been examined, he noted, and indications are they may be OK if they keep the activity at a certain level. But there is nothing in writing.

With voters in Missouri and Utah having spoken, bankers there need to be thinking about how to approach the financial needs of the cannabis business. Childears closed his MBA presentation with this nugget of advice:

“Be very careful. Don’t even think about it without serious discussion with your legal counsel.” 

Bill Poquette is Editor-in-Chief,

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