The recreational marijuana industries created by voters in seven states have largely been humming along without major issue since their first inception in 2012, except for one major sticking point.
Because of federal laws banks aren’t willing to touch the money made on marijuana.
It means marijuana businesses operate entirely in cash, creating a target for thieves, and pay their taxes entirely in cash, creating a headache for state tax collectors. The long-known problem is getting new attention after 19 attorneys general, including Alaska Attorney General Jahna Lindemuth, signed a bipartisan letter calling for a congressional fix.
“Allowing banks to work with these businesses is good policy, which is why the concept has bipartisan support,” Lindemuth said in a prepared statement. “Most importantly, bringing the cash from state-licensed marijuana businesses into the banking system will alleviate the public safety issues that come with having to rely on cash, instead of depositing money in a bank. It will also help state regulators better oversee the new industry and go after bad actors.”
The letter requests Congress pass some sort of legislation to give banks the option of doing business with marijuana businesses.
“To address these challenges, we are requesting legislation that would provide a safe harbor for depository institutions that provide a financial product or service to a covered business in a state that has implemented laws and regulations that ensure accountability in the marijuana industry,” explained the letter. “This would bring billions of dollars into the banking sector, and give law enforcement the ability to monitor these transactions. Moreover, compliance with tax requirements would be simpler and easier to enforce with a better-defined tracking of funds. This would, in turn, result in higher tax revenue.”
This year stands to be a critical one for the legalization of recreational marijuana. Earlier this month, U.S. Attorney General Jeff Sessions rescinded the Obama-era legal memo that directed prosecutors to ease up in states where marijuana was legal. It’s unclear what his action will mean for states, but it’s caused bipartisan call (including from Alaska’s three Republicans) for legislation to address the issue. It wouldn’t be surprising if the banking issue piggybacks on any pending marijuana legislation.
The press release
Attorneys General Urge Congress to Pass Banking Legislation for State Marijuana Businesses
January 16, 2018 (Anchorage, AK) – In a bi-partisan effort to support a reasoned approach to regulating state-licensed marijuana businesses, Attorney General Jahna Lindemuth and 18 other attorneys general from across the country sent a letter to Congress today seeking legislative action to expressly allow banks to provide services to marijuana businesses operating in compliance with state law.
“Allowing banks to work with these businesses is good policy, which is why the concept has bipartisan support,” Attorney General Lindemuth said. “Most importantly, bringing the cash from state-licensed marijuana businesses into the banking system will alleviate the public safety issues that come with having to rely on cash, instead of depositing money in a bank. It will also help state regulators better oversee the new industry and go after bad actors.”
Last week, the U.S. Department of Justice rescinded long-standing guidance that outlined how strong state regulatory systems would protect federal interests and priorities with respect to marijuana and marijuana-related banking transactions. Withdrawing that guidance has generated uncertainty and confusion for banks and state regulators seeking to implement state law.
“Ultimately, given legalization of medical or recreational marijuana in 29 states and several U.S. territories, marijuana has become an area where states are, and should be, taking the lead,” said Attorney General Lindemuth.
Federal legislation allowing transactions to occur through the banking system is an important step to enabling state regulators to do what voters have asked.
Joining Attorney General Lindemuth in today’s letter are attorneys general from California, Colorado, Connecticut, District of Columbia, Guam, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, New Mexico, New York, North Dakota, Oregon, Pennsylvania, Vermont, and Washington.