Banking on cannabis still a risky proposition

Marijuana businesses cannot open bank accounts.
Leland Rucker | Boulder Weekly

As has been stated here before, one of the major stumbling blocks for any legal cannabis business to operate successfully is the lack of access to banks. It is also the biggest deterrent to proper regulation of said businesses.

To that end, John Hickenlooper and Jay Inslee, governors of Colorado and Washington, sent a letter Oct. 2 to the most important names in the U.S. banking system: Secretary of the Treasury David Lew; Martin Gruenberg, chairman of the FDIC; Richard Cordray, director of the Consumer Financial Bureau; Ben Bernanke, chairman of the Board of Governors of the Federal Reserve; Comptroller Thomas Curry; and Debbie Matz, chairwoman of National Credit Union Administration.

Hickenlooper and Inslee ask those in charge for flexibility in federal banking regulations that will allow legal cannabis businesses — growers, processors and retail sellers — into the U.S. banking system. Currently, with cannabis illegal on a federal level, legal marijuana businesses in 20 states and the District of Columbia are pretty much stuck dealing only in cash.

Since most of us take banking, checking, ATMs and smartphones for granted when conducting business, it might be hard to understand how difficult it is to conduct a business outside the banking system in 2013.

When is the last time you worked for someone who paid you in bills and coins? Marijuana businesses in Colorado pay millions of dollars per year in state taxes, all in cash. Where do you keep all that money (after Breaking Bad, I keep thinking holes in the desert) and how do you move cash around without becoming a target for thieves?

“Access to the banking system by these state-licensed businesses is a necessary component in ensuring a highly regulated marijuana system that will accurately track funds, prevent criminal involvement and promote public safety,” the governors wrote. “In order to achieve the mutual federal and state goal of establishing tightly controlled marijuana regulatory systems, we urge you to issue inter-agency guidance that will allow legal, licensed marijuana businesses access to the banking system.”

That pretty much says it all. They reference the Aug. 29 Justice Department memo that indicated that cannabis businesses that follow the law won’t be prosecuted on a federal level, and remind them that, by allowing licensed businesses into the banking system, they can be better monitored and regulated so that doesn’t happen.

Clarity and federal government are two words not used often these days in the same sentence, so don’t hold your breath. It took the Justice Department 10 months to deliver the Aug. 29 memo. But for legal growers, processors and retail outlets, with less than three months before retail sales are legal, this can’t happen soon enough.

Due to an addition to the federal tax code in the 1980s, cannabis businesses also aren’t allowed to take basic business deductions for expenses that most other businesses take for granted, either, and that needs to change, too. Like access to banks, this isn’t a partisan issue. Liberal Oregon Rep. Earl Blumenauer teamed with California tea-partier Dana Rohrabacher to introduce a bill last month that would allow legal cannabis operators to the same deductions other businesses enjoy.

Colorado began taking applications for commercial retail sales of cannabis Oct. 1. Only current dispensaries are allowed to apply at this time, which gives them a nine-month window to establish their businesses before newcomers are allowed to try to cash in. The state has to reply to the applications by Jan. 1, the first day that sales will be legal to adults over 21 in Colorado.

Along the Front Range, Denver is the only major city taking applications, so at least for the time being it will be the closest place Boulder residents will be able to buy outside the still-thriving illegal markets. The second reading for Boulder City Council’s marijuana rules and regs is Oct. 22, with no date set as to when businesses can apply for city licenses.

Besides Denver, a host of mountain towns will be allowing retail stores, so you can plan mini-trips to Aspen, Basalt, Black Hawk, Breckenridge, Carbondale, Crested Butte, Durango, Eagle, Frisco, Georgetown, Glendale, Glenwood Springs, Idaho Springs, Leadville, Manitou Springs, Nederland, Northglenn, Red Cliff, Salida, Silverthorne, Silverton, Steamboat Springs and Telluride for your needs.

Finally, some encouraging news. Colorado farmer Ryan Loflin began harvesting 55 acres of hemp on his rural farm this month. This is significant. Of all the ridiculous things the federal government has done with regards to cannabis, outlawing hemp, an industrial product that the feds don’t seem to be able to differentiate from cannabis with higher THC levels, is perhaps the dumbest, and it’s been going on dating back at least to the 1930s.

Amendment 64 allows farmers in Colorado to grow hemp, and the Industrial Hemp Regulatory Committee, a state task force, has completed a set of preliminary rules for hemp production that will go to public comment and then to lawmakers for passage.

This harvest is more symbolic than anything, but let’s hope that Loflin’s harvest is the first of many. Hemp fiber, oils and seeds are used in a host of products, and until reefer madness took hold in America, it was grown here. It’s about time U.S. farmers finally reclaim a product that today has to be imported from other countries, mostly China, the largest producer of hemp. American exceptionalism at its nadir.

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  • Banking sector faces severe security problem. The only way they can be secured is using biometric access over the customers login.