Panel grapples over laws on pot banking
California is still grasping toward what State Treasurer John Chiang on Monday called “the best imperfect solution” for a fully functioning cannabis marketplace before recreational marijuana becomes available for sale next year.
One of the biggest questions is how California will grapple with federal laws that largely deny marijuana businesses access to bank accounts.
The Cannabis Banking Working Group, a panel convened by Chiang in December, met at Oakland City Hall on Monday. The effort aims at collecting input from regulators, financial institutions and cannabis businesses about how to resolve the legal tensions surrounding banking for California’s marijuana industry.
“The perfect solution comes with the decriminalization of marijuana by the federal government. That seems highly unlikely in the near term,” Chiang said.
Legalizing recreational marijuana in California next year will give rise to a industry with more than $7 billion in projected annual sales.
But most banks, credit card processors and other financial institutions refuse to do busi-
ness with the cannabis industry, as marijuana remains illegal under federal law.
Among other regulations, holding accounts for a marijuana business could subject banks to federal moneylaundering laws, which are designed to prevent the generation of income from illegal sources.
Last month, White House Press Secretary Sean Spicer said that the country should expect “greater enforcement” of federal law with respect to recreational pot. His remarks deepened anxieties about the divergence between Washington and states that have legalized recreational marijuana use.
As a result, without access to many banking or money transfer services, dispensaries and other organizations are forced to do business in cash.
“Virtually in every area, banking impedes us,” said Larry Thacker, the CEO of Caliva, a dispensary in San Jose, who spoke before the panel Monday. “We cannot deposit cash into our bank because we would have to lie about the source of those funds. We do not accept credit cards. We’re at an operating disadvantage against many of our competitors out there, and against every other normalized business.”
Cannabis businesses must also pay their taxes in cash.
“People come in with backpacks full of cash,” said Joe DeVries, assistant to the Oakland city administrator. “Not only is it unsafe, but it takes a lot more time to count. We have to hire additional staff.”
The banking group also heard from John Vardaman, a former Department of Justice attorney who helped craft what’s known as the “Cole memo,” meant to guide banks on how to serve marijuana businesses without violating federal law.
Despite its intentions, the memo, released in 2013, has not inspired widespread confidence among banks that they’ll be shielded from prosecution. But Vardaman, who spent much of his time Monday defending the document, urged the working group to use it as a foundation for state cannabis banking regulations.
Vardaman also cited remarks made by Attorney General Jeff Sessions this month, in which he said the Cole memo is largely valid and that the federal government does not have the resources to initiate nationwide raids of cannabis businesses.
“Any time you hear Attorney General Sessions invoke the words ‘limited federal resources’ in the context of marijuana, that is a nod to the underlying rationale of the Cole memo,” Vardaman said.
“The question remains whether marijuanarelated businesses will have access to bank accounts or be forced to operate in the largest black market since Prohibition,” he said.