Back in November 2014, our William Breathes wrote about the Fourth Corner Credit Union's efforts to provide banking services for the marijuana industry.
As Breathes noted at the time, FCCU was "set to open" — possibly as soon as January 1 — "and even has the backing of Governor John Hickenlooper, who calls it the 'end of the line' for the banking issues that have kept dispensaries in the dark ages."
But things haven't worked out that way. As of this morning, the credit union's website continues to feature the hopeful message "Opening Soon!" But a new ruling from the Federal Reserve regarding FCCU's application for a master account at the institution's Kansas City branch has created what the New York Times describes as a "roadblock."
So serious is this impediment that the credit union has filed a lawsuit against the feds. See it below.
Fourth Corner Credit Union describes itself as "the first of its kind.... the only credit union in the world constructed from the ground up to serve the interests of the legalized cannabis and hemp industries and their supporters."
Its mission statement reads:
The Fourth Corner Credit Union is dedicated to providing compliant banking services to those who share a common bond of support for the legalized cannabis and hemp industries. Driven to help our members flourish, join us in "Growing a More Perfect Union.”
That goal remains quite a way off. The Kansas City branches' rejection of the master account application is important for reasons described in this paragraph from the lawsuit: The italics in this excerpt and the one that follows are in the original:
Every depository institution must have (and does in fact have) access to the Federal Reserve payments system, either by having a master account, or by having access through a correspondent. Without such access, a depository institution is nothing more than a vault. Cash deposited at a financial institution is transported to the Federal Reserve branch. It is credited to the depository institution’s account and the cash becomes an electronic credit. Credits and debits from transactions with other depository institutions are settled in the institution’s account at the Federal Reserve Bank where an institution’s master account is maintained. In basic terms, an account at the Federal Reserve is the depository institution’s bank account.
The complaint makes it clear that the issue of marijuana businesses lacking access to traditional banking services due to cannabis remaining illegal at the federal level isn't unique to the Fourth Corner Credit Union or even to Colorado. Here's another key passage.
If the District of Columbia is counted as a state, there are 24 states that have legalized medical cannabis for distribution, taxation and regulation. Five of those states have gone further to legalize cannabis for adult use. An additional 15 states have legalized the use of low THC hemp based CBD oil for medical purposes. Furthermore, 20 states have allowed industrial hemp growing and cultivation with regulations that violate federal law.35 In total, there are only eight states (AR, ID, KS, LA, OH, PA, SD, WY) whose laws do not currently conflict with the federal Controlled Substances Act in some manner.... It is clear that the Federal Government's stance on cannabis prohibition is not honored by all but eight states. The majority of those states have pending legislation to change their position as well. None of these state licensed, regulated, and taxed businesses have meaningful and stable access to traditional banking services. The few MRBs that have bank accounts are at constant risk of their accounts being closed all of the sudden. The majority of MRBs are forced to operate in cash only, and to suffer the high cost of handling and safeguarding this cash. The public is at risk in having hundreds of millions of dollars of cash flowing about the streets of Colorado. The ‘seed-to-sale’ state and municipal regulation of cannabis works — until the point of sale when a sale generates cash.
With these matters in mind, FCCU "respectfully requests" the U.S. District Court in Colorado to "issue a declaration directing Defendant, Federal Reserve Bank of Kansas City...to grant...a master account at FRB-KC."
Speculating on the odds of success for any lawsuit is difficult. But as we know, the wheels of justice grind slowly — and that suggests the Fourth Corner Credit Union's "Opening Soon!" declaration will continue to linger for quite a while longer.
Here's the lawsuit.