By Hal Snow
When I was asked to provide an update on the banking status of the cannabis industry, I thought that the article would be simple and straight-forward. Despite the Cole Memorandum of August 2013 and the FinCEN Memo of February 2014, which attempted to provide federal guidelines to financial institutions electing to service marijuana businesses, only a few banks and credit unions have opened their doors to the industry.
And much of the landscape has shifted recently. On March 10, Sens. Rand Paul (R–Kentucky), Kirsten Gillibrand (D–New York) and Cory Booker (D–New Jersey) introduced the Compassionate Access Research Expansion and Respective States (CARERS) Act in the Senate.
The centerpiece of the CARERS Act is to reclassify marijuana from a Schedule I drug like heroin, LSD and peyote, which are deemed to have the highest potential for abuse and “no currently accepted medical use in treatment in the United States” to a Schedule II drug. That would be an acknowledgement under federal law that marijuana “has a currently accepted medical use in treatment in the United States or a currently accepted medical use with severe restrictions.”
The second important aspect of the CARERS Act is the provisions within Section 6 which would create a safe harbor for banks and financial institutions to do business with medical marijuana businesses operating legally under state law.
On March 14, Congress went one step further by passing a 1,635-page spending bill which effectively ended the federal government’s prohibition on medical marijuana. The spending bill forbids the federal government from using any of its resources to impede state medical marijuana laws.
Both the CARERS Act and the spending bill deal only with medical marijuana. Recreational marijuana is not addressed in either. Also, despite a potentially broad coalition of the members on both the left and right in Congress, passage of the CARERS Act is not likely to occur this year.
Still, these two events represent a significant shift in government attitude at the federal level. With 23 states having legalized some form of medical marijuana and four having legalized recreational marijuana, the shifting voter opinion might cause more widespread movement concerning the banking of the cannabis industry during the next three to five years.
Looking now at banks and credit unions in Washington State working with the marijuana industry, the OBU Credit Union of Tumwater is the most recent financial institution to offer services to producers, processors and even retailers.
OBU Credit Union is offering checking, deposit and savings services only to the industry. It has not begun offering loans to customers in the marijuana industry.
Other credit unions offering services include Numerica in Spokane and Salal of Seattle.
Due to the current uncertain nature of the medical marijuana industry in Washington State, none of the credit unions are providing financial services to the medical marijuana industry. Further, in general, the financial services are usually limited to depository services such as savings accounts, checking accounts and payroll. Traditional lending services remain very limited.
Hal Snow is a partner at Garvey Schubert Barer Law. He has more than 30 years of experience counseling business owners in the areas of asset protection planning, wealth transfer and transfer tax minimization.