Marijuana entrepreneurs want to build businesses, but the government will not let banks lend them any green.
Entrepreneurs from Washington state and Colorado, where recreational marijuana use is legal, are hoping that regulators and law enforcement will work to relax federal laws, allowing banks to make loans, provide checking accounts, and other services to cash-stricken marijuana businesses without fear of federal prosecution.
On Thursday, the federal Bank Secrecy Act Advisory Group and the Department of Justice (DOJ) met to discuss federal regulations regarding the use and vending of marijuana, including the role banks should play in the burgeoning legal pot industry.
This closed doors meeting was the first formal discussion between the two parties since August, when the DOJ released guidelines permitting Washington and Colorado to move forward with legal marijuana.
Washington Democratic Rep. Denny Heck and Oregon Democratic Rep. Ed Perlmutter have also been working on the Hill to reform federal marijuana laws.
Heck said in a statement earlier this year, “As a small business owner, I can’t imagine trying to operate a legitimate business without access to the banking system. Forcing legitimate businesses to operate on a cash-only basis without bank accounts is an invitation for robbery, tax evasion and organized crime. With twenty-one states and D.C. now allowing for some form of legal adult marijuana usage, federal law needs to be updated to reflect the reality of the situation in the states.”
Dan Riffle, director of federal policies at the Marijuana Policy Project, says creating a pathway for pot entrepreneurs to establish relationships with banks is also in the interest of the public’s safety and states’ bottom line.
“The reason why prohibition has failed is because you get criminals and shady businessmen involved in this industry and it is not regulated like other products. The reason why voters in Washington and Colorado passed these initiatives is because they wanted to see marijuana regulated and taxed just like alcohol,” he told The Daily Caller News Foundation.
Riffle says that there will be lost tax revenue within states if marijuana start-ups are not provided with banking services.
“It is very difficult to do the kind of… accounting to verify that taxes are being paid properly when all transactions are being handled by cash. They are being recorded in the books by hand rather than having a paper trail of every transaction,” he explained.
And the marijuana business community is not pushing back on further government involvement. In fact, they are asking for it.
“There is no other group that is saying only, ‘please tax and regulate me,’” says Kevin Oliver, the Washington State Executive Director of the marijuana advocacy group NORML.
He says banks are also looking for the government to establish regulatory practices for the pot industry because they want a piece of the pie.
“Bank of America is saying, ‘will you give us some guidance, because we’ll take their money.’ … The banks know there are billions of dollars in the industry and they want to play with that too,” says Oliver.
He is hopeful that although Congress may not pass any legislation regarding the issue in the near future, this meeting may still result in guidelines that will relieve any fears banks may have about getting involved in Washington and Colorado’s pot industry.
Oliver expects that the DOJ or another government agency will announce these new guidelines near the beginning of next year, right before entrepreneurs from Colorado and Washington will be granted licenses to start operating their pot businesses.
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