For pot businesses, using banking system is a safety issue
The news that the federal government is expected to give banks the cautious approval to work with marijuana businesses is exactly what's needed as Colorado is about to step into an industry with so many unknowns.
Without banking, the new retail marijuana endeavor is being set up as a magnet for trouble if it remains a cash-based industry.
So far, banks have refused to provide basic services to cannabis businesses because pot is still considered an illegal Schedule 1 substance under the federal Controlled Substances Act — despite legalization in Colorado and Washington.
That has created a roughly half-billion-dollar industry that deals in cash. You can imagine the problems from workers pilfering, money laundering and robberies.
Michael Elliott, director of the Medical Marijuana Industry Group, points to a California case where a dispensary owner was tortured by thugs who chopped off his penis hoping to force him into divulging the location of cash they believed was hidden in the desert.
Elliott knows of robberies in Denver dispensaries and has heard a growing chorus of concern from business owners.
"It's like they are setting us up to get blamed for something horrible happening," Elliott said. "When something does happen, we are going to be pointing our fingers back and say, 'Fix banking. Treat us like a legitimate business.' "
On the morning of Jan. 1, when stores open in Colorado to legally sell marijuana to adults, people likely will line up with wads of cash in their wallets.
"Talk about a dangerous situation," Elliott said. "We are having positive discussions with the Denver Police Department about security. And businesses are hiring their own security firms. That doesn't change the fact that this is incredibly stupid."
Business owners trying to transition their medical marijuana centers into retail pot stores are on shaky financial foundations. They have difficulty getting loans, can't accept credit cards or checks, and struggle with how to pay employees.
Elliott Klug, founder of the Pink House Blooms dispensaries in the metro area, has had accounts closed at five banks after they've said his business was too risky.
"We've kind of just hunkered down, and pay everything in cash," he said. "I would love to be able to process credit cards, write checks. It would be great to be a normal citizen in the banking world."
Sen. Michael Bennet's staff on Wednesday said the U.S. Department of Justice understands the urgency and is expected to issue some sort of guidance for banks early in the new year.
That was confirmed Thursday by Jack Finlaw, Gov. John Hickenlooper's chief legal counsel, who said in a press call that he expects guidance in the first quarter of 2014 that is similar to a Justice Department memo in August that gave Colorado and Washington a rule book to follow to avoid federal intervention.
Finlaw said he expects the feds to issue a "yellow light," but not a green one.
Notoriously risk-adverse bankers may not immediately jump into the marijuana rush, but any movement on this is welcome.
Meanwhile, Rep. Ed Perlmutter, the Democrat from Golden, continues to push legislation with Washington state Democratic Rep. Denny Heck that would allow pot producers to work with banks. That bill faces an uphill climb in the Republican-led House, even with support from Republicans like Rep. Mike Coffman of Aurora.
That makes even a yellow light from the administration an important development.
"By this time next year, half the states will have some medical marijuana provision or full recreational use," Perlmutter said. "It has to be addressed. ... You can't operate in just cash. It invites too much trouble."
Aurora District Office
3300 S. Parker Road
Cherry Creek Place IV Suite #305
Aurora, CO 80014
Hours: M-F 8:30 AM - 5:00 PM Meetings By Appointment Only
Washington, DC Office
2443 Rayburn House Office Building
Washington, DC 20515
Hours: M-F 9:00 AM - 6:00 PM