Eric Holder, the United State's Attorney General, brought to national attention the growing problem of the dispensary freeze out from banks stating that; "legal marijuana businesses should have access to banks."
Medical Marijuana and Banks Today:
Marijuana is still listed as a Schedule 1 Controlled Substance according to the federal government. This means currently there is no accepted medical use of marijuana. This means that financial institutions (banks) have denied business accounts to dispensaries because they've been afraid of getting fined.
Right now, marijuana dispensaries have been forced to operate essentially on a cash basis. With Colorado dispensaries exceeding $5 million in the first week of operation and more than a 25% tax being placed on recreational pot, this method of business is no longer viable or safe for the marijuana industry or state governments. With 20 of our states having medical marijuana laws and two of which, Colorado and Washington, have legalized the drug for adult-recreational use, the federal government has acknowledged the need for financial regulation.
Holder stated; "You don't want just huge amounts of cash in these places. They want to be able to use the banking system... There's a public safety component to this. Huge amounts of cash, substantial amounts of cash just lying around with no place for it to be appropriately deposited, is something that would worry me, just from a law enforcement perspective."
And he's right. The target that is placed on many dispensaries and their employees is growing bigger with more states passing mmj laws. While legitimate medical marijuana businesses are forced to pay electricity bills, payroll and rent entirely on a cash basis. There has been a call to action for financial institutions to keep up with the marijuana industry across the country.
Rules for Banks and Medical Marijuana Businesses
Earlier this month, the Obama administration answered this call to action with a guidance outlining how banks should work with and provide services to marijuana businesses.
These rules give a rough outline on how banks should proceed with mmj businesses across the country.
Medical Marijuana Banking Rulles:
- Whether banks want to do business with marijuana dispensaries is still up to banks
- The memo notes that marijuana is still federally illegal
- However, since individual states are legalizing cannabis, there needs to be a prioritization effort to deal with the change: "Cole Memo" priorities
- Many rules are based on whether businesses violate one of the "Cole Memo" Priorities
- There are three separate categories businesses will be filed under by banks
- Financial regulation and oversight will largely be the responsibility of the bank
- Check out our entire memo breakdown for banks here.
What the Banking Rules Mean for Dispensaries in California, Colorado and Washington
A major concern of the memo is that its puts a lot more responsibility and risk up to financial institutions. Many big banking institutions have expressed these concerns and have been hesitant to jump into business with legal marijuana. But with the amount of revenue and the interest of the federal government to regulate this won't be the case for very long.
The new rules update has opened the door for smaller local banks to tread these waters. So what does this mean for marijuana legal states?
What this means for Medical Marijuana in California, Colorado and Washington
The introduction of this law this might resolve some of the problems that has been plaguing the Los Angeles dispensary industry for the past two years.
The current dispensary situation in Los Angeles is that there are too many illegal dispensaries opening up and not enough enforcement. A recent law allowed a couple legal shops to open up legally but since, not much has been able to be done about the competition of illegal shops. With the provisions that banks will be putting on medical marijuana businesses in LA it would make it virtually impossible for illegal pot shops to get a business checking account without notifying marijuana enforcement agencies with the "SAR" filing requirement. This new banking regulation will significantly drive patients towards legitimate cannabis dispensaries and act as a buffer against too many illegal shops from opening.
Meanwhile in Colorado and Washington, with recreational marijuana now being legal it's a major problem that their new-found legal profits have no place to be deposited. Now, smaller banks are beginning to open up limited service business checking accounts to begin navigating the financial waters.
Medical Marijuana Dispensary Merchant Processing Solutions
With the banks onboard, Merchant Service Providers are soon to follow. Cafe Cartel is working closely with our dispensary merchant processor so that as soon as the change takes effect we can provide your business with merchant services and payment processing at a great rate. This gives your medical marijuana dispensary the benefit of being THE dispensary that can accept credit cards. Contact us at 866-973-8099 or fill out a quote for more details on dispensary merchant processing.