The Pot Industry's Problem—Too Much Cash

Even though marijuana is legal in several states, the industry still can't use the banking system, and Congress isn't close to finding a solution.

Customers shop for retail marijuana at 3D Cannabis Center, in Denver on May 8, 2014.
AP Photo/Brennan Linsley
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Alex Rogers
June 29, 2016, 8 p.m.

This November, millions of people in a few states will likely vote on whether to legalize recreational pot, potentially joining those in Colorado, Washington, Alaska, and Oregon who already enjoy the privilege. But even if they’re successful, the next marijuana moguls will face the same threats that have worried their predecessors, forced to deal a lucrative crop in hard cash because banks—fearing federal scrutiny—don’t want to touch their money.

It wasn’t long after Coloradans legally began smoking pot for fun in 2014 that reports emerged of armed guards, cars, and vaults moving and storing thousands of dollars in cash, sprayed with Febreeze and stuffed in envelopes. The dissonance between state and federal law, which still classifies marijuana as a Schedule I drug on par with heroin, ecstasy, and LSD, means that the financial system is hesitant to embrace the burgeoning marijuana industry, even as the Obama administration attempts to give the pot business greater access to it.

Congress has failed to remedy the issue. One proposal to prevent federal banking regulators from discouraging banks from providing financial services to state-sanctioned marijuana businesses passed the Senate Appropriations committee in mid-June, but a similar proposal was blocked from even getting a vote by House Republicans last week.

In an interview, Sen. Jeff Merkley, a sponsor of the legislation, said he recently traveled with a pot seller from Portland to the Oregon state capital of Salem. The businessman carried his $70,000 monthly tax payment in his backpack, according to the senator.

“From every corner of the state, these bags of cash are coming in at the end of every month,” said Merkley. “This is an invitation to assault and robbery. It’s an invitation to money laundering, to tax evasion, to mafia involvement. This is just crazy, so we have to change it.”

Marijuana advocates have portrayed the legislation as a matter of public safety, seizing on the death of former Marine Travis Mason, who was working as a security guard at a pot dispensary when he was shot this month. It is the first known on-the-job death at a licensed marijuana business in Colorado, according to the Associated Press. When asked why he supported the proposal, Rep. Denny Heck of Washington replied, “Travis Mason.”

“Travis Mason,” the congressman repeated. “Every single member who opposed allowing this amendment ought to have that young man’s name tattooed on their body to remind them.”

But even Heck acknowledges that the bill wouldn’t do enough to assuage the banking industry. In a written statement, James Ballentine, a top official at the American Bankers Association, said that encouragement and guidance “isn’t enough,” adding that Congress must change a number of laws before banks would feel “comfortable” banking marijuana businesses.

“Financial institutions face significant risk for violating federal law if they offer banking services to marijuana-related businesses,” Ballentine wrote. “The federal statutory barriers include the Controlled Substance Act, USA Patriot Act, Bank Secrecy Act, Racketeer Influenced and Corrupt Organizations Act, and other federal statutes.”

“Encouragement is great, but possession and distribution of marijuana is still illegal under federal law,” he added.

Marijuana legislation broadly has had a tough time moving on Capitol Hill. One proposal which seemed likely to pass through Congress would have allowed Veterans Affairs Department doctors to discuss and recommend medical marijuana as a potential treatment with their patients in states where the drug is sanctioned. While a Senate panel approved it, and a clear majority of House members support it, Republican congressmen moved last week to block it. Now some members, including Republican Sen. Steve Daines of Montana, are pressuring congressional leaders to insert the language in an appropriations bill before it gets to the president’s desk.

Some of those who want to broaden banking access to pot companies this year think that their proposal will hold a similarly dire fate. But they hold onto hope, pointing to states such as California and Nevada, which look to legalize recreational pot this year at the ballot box.

“This is inevitable,” said Heck. “Eventually Congress will catch up with the voters, but it’s going to take a while.”

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