Posts Tagged ‘cannabis banking’

Hawaii the First State to Require Debit-Only Cannabis Sales

touch-screenBeginning Oct. 1, Hawaii will be the first state in the U.S. to require cashless-only cannabis sales.

A Colorado-based credit union will permit dispensaries in Hawaii to open bank accounts, and a debit app called CanPay will enable patients to purchase cannabis with their smartphones. The app is currently in use in six states, but Hawaii will be the first to use it exclusively for medical marijuana transactions.

Because marijuana is still illegal under federal law, most banks and credit card companies refuse to work with cannabis industry. As a result, marijuana businesses are forced into cash-only transactions, making day-to-day operations tedious and putting dispensaries and employees at risk for robberies and other crime.

To put the amount of cash floating around the marijuana market in perspective, consider that Colorado consistently makes $100 million in pot sales every month (with California expected to dwarf that number)–that’s a lot of physical money, and most businesses don’t to have anywhere to put it.

Having access to banking is a big deal in the cannabis industry–and widespread access probably won’t happen until Congress decides to deschedule marijuana.

Hawaii was one of the first states to legalize medical marijuana in 2000, but dispensaries weren’t legalized until 2015.

The state Department of Health delayed the roll-out of medical marijuana until this year because the state didn’t have a certified lab–putting dispensaries in the unenviable position of growing and harvesting plants that they weren’t allowed to sell.

So far, there are eight licensed dispensaries in the state: Three on Oahu, two on Hawaii Island and two on Maui. The state’s first two medical marijuana dispensaries opened last month.

A Small Win for Cannabis Industry Banking

cannabis-bankingDenver-based credit union, Fourth Corner, has another shot at bringing banking to the cannabis industry. Since the beginning, banking has always been an issue for cannabis businesses since cannabis is still federally illegal, but this marks a small step forward in progress.

Fourth Corner opened in 2014, the same year recreational weed sales became legal in Colorado. The state gave the credit union a charter, but they were denied a master account from the Federal Reserve–something they need for basic banking transactions.

The credit union challenged the denial but a district court upheld the it, dismissing the case with prejudice in January 2016. The U.S. District judge overseeing the case ruled that granting access to the Federal Reserve would “facilitate criminal activity.”

Fourth Corner again appealed the decision, and this month they met with success when the U.S. Court of Appeals for the Tenth Circuit vacated the 2016 ruling. The ruling means that the credit union can submit a new application to the Federal Reserve Bank of Kansas City.

Mark Goldfogel, the executive vice president of industry relations for Fourth Corner, said, “That really is, at its core, the same question: Does a cannabis- or marijuana-related business have rights to normal business protections and legal protections? And that’s changing literally right in front of us.”

The 10 Circuit’s ruling did come with a caveat, however: Fourth Corner’s member base would be limited to marijuana industry supporters such as nonprofits and advocates as long as marijuana remained illegal on the federal level.

Deirdra O’Gorman, Fourth Corner’s chief executive officer, said, “This really wasn’t a huge change to our business plan,” she said. “Our ultimate goal is to give these directly licensed businesses legitimate (banking services).” She added that Fourth Corner would be reapplying for a master account “sooner rather than later.”

However, even if the credit union is approved for a master account from the Federal Reserve, they still have the additional hurdle of obtaining insurance from the National Credit Union Administration. Fourth Corner’s application to the federal regulator of credit unions also met with denial in January 2016.

Illinois Treasurer Urges Trump to Let Banks Work with Cannabis

The uneasy relationship between cannabis and the banking industry could improve if Illinois State Treasurer Michael Frerichs has anything to do with it.

Frerichs issued a press release Monday, urging the Trump administration to give clear guidance to financial institutions regarding medical marijuana. In his letter, he urged President Trump to reassure banks that they will not face penalties or prosecution for doing business with state-licensed marijuana growers and dispensaries.

“Medical marijuana is not right for everyone. However, its positive results for those with debilitating conditions, including Veterans and children threatened by seizures, are undeniable,” Frerichs said. “Updating our banking laws to embrace commonsense change will allow Illinois to properly manage this reasonable program, guarantee uninterrupted access to medical users, and protect financial institutions that serve the industry.”

The nomination of Jeff Sessions as attorney general has marijuana advocates unsure if he’ll reverse President Obama’s directive not to enforce federal marijuana laws. Federal law prohibits banks from processing money from the legal marijuana industry, making day-to-day transactions difficult. Most dispensaries work on a cash-only basis, and business owners have difficulty opening checking accounts and securing loans. The current system also makes it difficult for states to audit sales, verify taxes are collected, and encourages a gray market and criminal activity.

Lack of access to banking has been a thorn in the side of the legal marijuana industry since its inception. Even ancillary cannabis businesses have difficulty accessing banking services to send or receive payment. Frerichs press release notes that “most refuse to provide banking services to those in the medical marijuana industry while smaller community banks do so with great trepidation. The lack of full engagement hobbles the industry despite the availability of marijuana in 27 states.” Currently, marijuana is still considered a Schedule I drug under federal law.

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