Until the ink is dry on a new federal law, financial types won't touch ganja profits—which only benefits the private security industry.
Ballpark Holistic Dispensary in Denver, CO. Photo via Flickr user Kent Kanouse
"Congress actually did something this week," Bill Maher said in his Real Time opening monologue last Friday. "They passed the law that allows banks to accept deposits from marijuana dispensaries. In the past this was a very thorny issue, because nobody wants to do business with sketchy characters on the fringe of society. But drug dealers need to put their money somewhere."
Excluding the punch line, that was pretty much the way the story was reported in media outlets across the country: Congress votes to allow banks to do business with dispensaries! Problem solved. All of those millions of dollars in cash the marijuana industry has been forced to stash (causing potential nightmares of theft, corruption and tax evasion) can now be deposited safely into a checking account.
But just as Denver officially decriminalized marijuana way back in 2005 only to wait eight more years to get recreational dispensaries in Colorado, we still have an incredibly long road ahead before Bank of America starts offering Credit & Cannabis loans.
First of all, this was only an amendment to the Financial Services appropriations bill, one that bars the US Treasury Department and Security and Exchange Commission (SEC) from spending money to penalize banks that partner up with pot shops. It was sponsored by Representatives from Colorado, California and Washington, who had an easier time slipping it in because there was an open floor amendment process with this bill, so they could get it in there without going through a committee. That probably won't be the case when it comes to the spectacularly dysfunctional institution known as the United States Senate.
"We now have a working majority in Congress when it comes to marijuana," Colorado Congressman Jared Polis tells me over the phone. "In the Senate, we have not yet won a vote on any amendments related to marijuana." Without much pro-pot support in the Senate, this amendment is unlikely to get a favorable vote—if it gets a vote at all.
Polis and other lawmakers have introduced marijuana banking bills in the past, none of which have ever come up for a vote. This amendment clearing the House is a welcome change, then, but as even Polis admits, it's only "a symbolic vote." Also purely symbolic was the law Colorado's state legislature passed in June to permit pot businesses to petition the Federal Reserve for banking clearance.
And even if the new federal measure passes the Senate, the Colorado Bankers Association insists that they'll need to see a ring on their finger before they fully commit to cannabis.
"This vote makes a strong statement that a majority of the US House supports some kind of reform for financial services for marijuana businesses," CBA president Don Childears said in a statement. "Due to technicalities, it doesn't have much direct impact even if adopted. Its value is in the majority of the US House now on record favoring some reform."
Childears points out that marijuana is still illegal according to the federal Controlled Substances Act, and that any involvement with proceeds from the plant remains tantamount to money laundering.
"Right now a lot of banks are weary of serving the industry because they fear they could be penalized by the financial crimes enforcement network for having a connection to what is still considered federally illegal activity," says Taylor West, deputy director for the National Cannabis Industry Association. "This February, the Treasury Department put out a memo that laid out a roadmap for banks to serve marijuana businesses, but because that memo didn't include actual changes to the law, and did not explicitly say that the banks who follow that roadmap will not be penalized, most financial institutions did not see that as good enough for them to move forward."
So basically, the Colorado Bankers Association is not impressed with any of Washington, DC's flirtatious invitations for their members to join the marijuana market. They want cannabis to be fully legal on a federal level before they sign off on any dealings with these Thai stick tycoons.
"The Colorado Bankers Association don't necessarily speak for every bank, though," West tells me. "We are starting to see certain banks quietly taking on a small number of clients in the industry. They've made it clear to their clients that they don't want to be publicly serving the industry, because they don't want a flood of cannabis businesses knocking down their door asking for accounts."
"The banking industry is very conservative; they don't want a yellow light, they want a green light," points out Alan Brochstein, CEO of 420 Investors, a company that keeps a close eye on the multi-billion dollar pot market. He says the vote of confidence the House gave marijuana banking last week "is a positive move, but the market didn't seem to care. It's not an all-encompassing bill, and it doesn't have much of a chance in the Senate."
Brochstein says that investors are paying close attention to security companies like Blue Line Protection Group, who help guard the large cash-loads Colorado dispensaries deal with on a typical business day. Blue Line's stock recently went public, and if we see a solution to the marijuana-banking crisis, there might not be same demand for help protecting those stacks of bills lying around—thereby cutting the legs out of a blossoming cannabis security industry.
Ultimately, Bill Maher was right: Congress did do something last week. Lawmakers put another spike in the railway of integrating marijuana as a national cash crop, and also illustrated some surprising party lines drawn around this issue. When a Republican House can push through marijuana banking legislation, and a Democratic Senate is virtually certain not to follow suit, it's a testament not just to institutional obstacles (the 60-vote threshold for cloture in the Senate) but also lingering fear on part of liberal politicians.
"What happened last week was just another symbolic vote," says Congressman Polis. "But we were able expand our majority on this issue by adding a few votes. So it's only a matter of time before we're able to provide some degree of relief for banks and dispensary owners."
Until then, this 2.3 billion dollar industry will continue to be a (mostly) cash business.
Josiah Hesse is a journalist from Denver, Colorado, covering the local music, comedy, marijuana, and political landscapes. Follow him on Twitter.