- Courtney Verrill
The Senate Appropriations Committee voted on Thursday to allow banks to provide financial services to legal recreational and medical marijuana dispensaries, according to The Denver Post.
Marijuana is still listed as a Schedule 1 substance by the federal government, so marijuana businesses in states where recreational use is legal, like Colorado, are forced to operate on an all-cash basis.
The vote on Thursday approved an amendment to the Financial Services and General Government Appropriations Bill, which provides annual funding for some government agencies, including the Treasury Department.
A standalone bill aimed at fixing the marijuana industry’s banking issue, with nearly identical language to the amendment, failed to reach any debate last year. It’s not clear how the amendment will be received this year.
“We’ve seen this all before,” Jeff Foster, a co-founder of JANE, an express ordering kiosk for cannabis retailers, told Business Insider. “I hope that some progress is being made. But certainly what happened yesterday [the Senate’s vote] was by no means a watershed moment.”
This isn’t the first time the federal government has tried to give banks the green light to work with marijuana businesses.
In February 2014, President Obama announced – with the backing of the Treasury Department and the Justice Department – that the federal government would not prosecute banks that dealt with money from legal marijuana dispensaries.
Marijuana dispensaries were also supposedly allowed to get loans and set up credit and checking accounts with banks, just like any other retailer.
None of this actually happened. Two years later, marijuana businesses still can’t get loans, and customers can’t even use credit cards to buy the product. For many banks, it’s simply not worth the risk for banks to do business with marijuana dispensaries.
Operating on an all-cash basis is a huge risk for marijuana businesses, who have been forced into a kind of a “gray market” says Foster.
There’s the issue of theft – it’s not uncommon for dispensaries to partner with armored car services to handle all the cash – as well as issues with actually tracking the payments, and understanding how much money is actually being exchanged.
That’s not to mention that dispensaries are forced to pay both their employees and their taxes in cash.
“Whether you are for or against legalization, you have to recognize that having marijuana businesses handling huge amounts of cash with nowhere to deposit the money is a public safety concern that Congress has to tackle,” says Michael Collins, the deputy director of national affairs at the Drug Policy Alliance.
It’s likely that the marijuana industry’s banking issues will take some time to fix.
“Banks still regulate themselves,” says Foster. “And the resistance to marijuana is mostly based on reputational risk. There’s still a great stigma in the banking community around marijuana. It’s palpable.”