The federal catch-22 of cannabis and banking

Analyzing statements from Obama and Holder


One vivid memory from my first visit to a retail cannabis shop on Jan. 1 was looking over at the cash register just as an employee handed an enormous wad of bills to a manager, who quickly whisked it off into another room.

That image was in my head while reading the words of President Barack Obama and Justice Department Chief Eric Holder in the last couple of weeks. First, the president of the United States just said, on the record, that cannabis is less dangerous than alcohol and that it’s important for the Colorado and Washington legalization efforts to go forward.

To some, that might not be enough, but to me, his words say a lot. Since cannabis is a Schedule I drug, federal officials have to be very careful what they say on the record. And the president proclaiming that legalization efforts must go forward flies in the face of official policy, which states that cannabis has no medical applications and a high risk for abuse. This tells me that Obama has been studying the material, pro and con, on cannabis and, as with gay marriage, his position is “evolving.”

How many people in government positions feel the same as Obama? You can bet there are bureaucrats who use cannabis or know that by this point that the drug war is little more than a cash cow for law-enforcement contractors. But they can’t say anything like that in public. And here is the boss saying just that.

Not that the Obama administration has been expediting the banking issue, still the biggest obstacle to making legalization work. As it stands now, because cannabis is illegal at the federal level, banks and financial institutions are discouraged from working with cannabis businesses and in fear of prosecution for racketeering or money laundering just by taking deposits from marijuana-related businesses.

It’s been almost four months since governors Jay Inslee of Washington and Colorado’s John Hickenlooper asked for guidance from the government and the country’s banking and credit-card gurus. Official response since has been mostly intermittent bread crumbs of hope, the most notable coming last week in a speech at the University of Virginia, when Holder announced that regulations would be forthcoming concerning banks and cannabis.

 “You don’t want just huge amounts of cash in these places. They want to be able to use the banking system,” the secretary said. “There’s a public safety component to this. Huge amounts of cash — substantial amounts of cash just kind of lying around with no place for it to be appropriately deposited is something that would worry me, just from a law enforcement perspective.”

Well, duh. It’s not that anyone in the business, or Justice, hasn’t known this since long before I saw the wad of bills change hands on Jan. 1. But here’s the catch-22: Justice’s guidance for cannabis businesses in Colorado and Washington was that those that operate under the law won’t be interfered with on a federal level. But since businesses can’t use banks, it is that much more difficult to operate legally, which makes them more susceptible to government interference.

Even crazier, until the government acts, it will be unable to watch these companies and how they operate (bank accounts are so much more efficient than cash), which means taxes can’t properly be assessed. The situation is so bad here that some credit-card companies are allowing cannabis transactions in Colorado marijuana businesses, even though it’s illegal.

So if it ever expects to share in cannabis taxes (and you know it does, or will soon) it’s definitely in the best interests of the government to allow cannabis businesses access to the financial system.

Holder’s office quickly clarified the secretary’s remarks, issuing a statement that Justice would be issuing guidelines similar to those given to Colorado and Washington recently on federal involvement in legalization efforts. A yellow rather than the green light Holder suggested.
Obama and Holder are taking heat for their positions — from the right for thumbing their noses at current federal statutes and from the left for not going further. And, of course, the elephant in the room is Congress, which could pass legislation that would end this drug-war/prohibition nonsense. That’s unlikely with lobbyists whispering in congressional ears and continuing the gravy train for their law-enforcement clients.

That could change as public opinion continues to shift away from prohibition, something we’ll probably see come to a head in the 2014 and 2016 election cycles, as more states petition or move to decriminalize or legalize. Don’t forget that even Texas Gov. Rick Perry came out this weekend for medical marijuana. Who could have predicted that even a few months ago?

Some banks are saying that until it is legalized at the federal level, they won’t accept cannabusiness money. But Bank of America has agreed to hold the excise tax fund in Washington, and you have to think that financial institutions, and the federal government, are eager to get their cut of the emerging, multi-billion marijuana market.

For Colorado businesses, guidance can’t come soon enough. 

Send tips, suggestions and criticisms to