Colorado legislators have tried for years to find a state-centric solution to federal banking regulations as they apply to marijuana -- rules that have forced many shops to deal mainly in cash. But previous efforts have failed, and many observers thought this year's attempt at laying the groundwork for so-called marijuana co-operatives would meet the same fate. But the bill passed -- barely -- and awaits Governor John Hickenlooper's signature.
What's the measure do? Will co-ops ever come to pass? Or is the effort mainly symbolic? Here's what Representative Jonathan Singer, the bill's sponsor, has to say.
House Bill 14-1398, on view below, is complicated, Singer concedes -- "but if I was to tell you what it did in a sentence or two, I'd say that it creates a financial services cooperative for the marijuana industry that's otherwise up until this point been unbanked. It gives businesses the opportunity to form a cooperative that works like a credit union, but with even more scrutiny -- and no federal insurance."
In addition, Singer continues, "It allows us to fire a shot across the bow of the Federal Reserve. Not only does it give them a plan for what we think banking should look like for marijuana if traditional banks can't step up to the plate, but it would actually put in place these cooperatives, which would make those arguments for the state. Because the federal government doesn't deal in hypotheticals."
Senator Pat Steadman with Governor John Hickenlooper at the 2013 signing of the civil unions bill.
In shepherding the legislation through the general assembly, Singer achieved a goal that predates the 2012 passage of Amendment 64. The previous year, after major banks throughout the state stopped working with marijuana businesses to avoid running afoul of federal drug-trafficking laws, Senator Pat Steadman spoke to us about creating credit unions for dispensaries and the like at a statewide level. But Steadman's proposal died in early 2012, and subsequent efforts to revive the concept went nowhere.
After Amendment 64's passage, federal officials belatedly pledged to make changes to the banking system in regard to marijuana -- but banking memos issued in February did little to assure the financial industry. The documents gave banks permission to offer financial services to legal marijuana businesses, but they also required them to submit filings known as "Suspicious Activity Reports," or "SARS," that we described at the time as "onerous and dripping with potential liability -- perhaps so much so that banks may still shy away from working with marijuana businesses."
That proved to be the case. Indeed, many if not most marijuana businesses remain largely cash operations, with all the dangers that entails.
"The Denver Police Department said that in 2009, something like 17 percent of shops were robbed or burglarized," Singer says, "and another analysis from NBC said that out of 325 companies in Denver, there had been 317 burglaries and seven robberies over the previous two years. And these places aren't being targeted for one kind of green. They're being robbed for the kind of green that works on every street corner: cash."
In the meantime, Singer continues, "the federal government isn't seeing the issue on the same level we are. These are business owners and workers whose safety is being put at risk -- and the same thing goes for community members. Let's say a robber thinks he knows where a dispensary owner lives. But what if he goes to the wrong house and starts demanding to know where the cash is? You might have a suburban couple that's got no idea what's going on and are now at risk of their lives because the Federal Reserve won't step up and let this now-legal industry access the same services anybody else can."
Continue for more about the marijuana co-op bill, including the complete document. As HB-1398 went through its legislative journey, Singer says backers made it clear that co-operatives were neither banks nor credit unions -- an emphasis that initially persuaded lobbyists for the latter not to actively oppose the measure. But at the eleventh hour, a conflict nearly derailed the process over what Singer says were "two words: industrial hemp."
Representative Jonathan Singer in a photo from his campaign website.
Specifically, the Senate version of the bill allowed industrial hemp pioneers to use the co-operatives, too. Banking reps didn't like that, since they feared it would cut into their business. After all, farmers growing lots of different crops could simply neglect to mention that hemp, which also remains illegal at the federal level, was part of the mix and continue to work with their regular financial institutions, as they'd always done.
With this year's legislative session about to expire, Singer and other supporters of the bill had the choice of forming a committee to reconcile the differences between the bills (a time-consuming procedure) or simply try to push the one that included the industrial hemp provision through the House against the opposition of banks and credit unions -- which is what they wound up doing. In the end, the bill passed by a grand total of one vote.
Not that anyone should expect marijuana co-ops to start popping up any day. Once the bill is signed, Singer envisions three possible scenarios about what might happen next.
If the federal government approves of the co-ops, he says, "we're good to go. And that would lead to some other good things happening in the sense that traditional banks would probably put much more pressure on the U.S. Congress to allow the marijuana industry to access their services."
Singer also thinks the feds "could say 'yes, but here's a couple of things you need to fix first.' And that would give us some clarity about how to move forward."
And the third option? "They say 'no,' with no reservations. And at that point, we'd be able to go back to Congress and say, 'Look, we gave it our best shot, came up with a good plan, crossed our T's and dotted our I's, but they said we can't do it. So now it's time for you to get going.'"
In the meantime, Singer is pleased the process is finally headed what he considers to be a positive direction. "This is Colorado's last major piece to our pot puzzle," he maintains. "We'll be tweaking and pushing at the edges of laws related to marijuana at least until the federal government gets its arms around this. But this is one of the cornerstone components of marijuana and public safety.
"To get this done is so exciting for me, because it helps put that puzzle together. And if this goes into place, a lot of other things will start falling into place, too."
Here's the co-op bill.
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More from our Marijuana archive circa February 14: "Marijuana banking memos from feds don't solve all problems, advocate says."