Colorado Launches Array of Marijuana Banking Efforts

After over six years of limited movement at the state level and with Congress currently stalled, Colorado lawmakers and other officials have launched several campaigns to provide more guidance and protection for financial intuitions that provide services to the state's legal marijuana industry.

Although currently legal in Colorado and ten other states, as well as Washington, D.C., recreational marijuana businesses haven't been cleared for banking by the federal government. But on Monday, February 3, Governor Jared Polis and the state Department of Regulatory Agencies announced initiatives to "increase the number of financial service providers in Colorado who serve the state’s legal marijuana and industrial hemp industries."

“As the first state to establish a legal marijuana industry and one of the first to implement an industrial hemp program, Colorado has become a national economic leader in the cannabis industry,” Polis says in a statement announcing the moves. “We are excited to release a bold, forward-thinking roadmap to provide much-needed guidance, clarity and support to state-chartered financial service providers that work with or are interested in working with the state-legal cannabis industry.”

In announcing the Roadmap to Cannabis Banking and Financial Services, Polis and DORA outlined their goals of providing regulatory guidance and encouraging technologies in the financial space to work with marijuana companies while reducing barriers for loans, lines of credit and account access for marijuana and hemp business owners. The “Roadmap to Cannabis Banking & Financial Services” is headed by DORA's divisions of banking and financial services, and includes strategies for banks and institutions interested in serving marijuana, hemp and related companies without running afoul of federal drug, money laundering or racketeering laws.

The Roadmap's path comprises regular stakeholder meetings, finding new ways to serve marijuana businesses through money transferring, pushing for more federal protection, engaging with state-chartered banks and credit unions, and guiding the way through state and federal obstacles faced by marijuana businesses and financial institutions when trying to work together.

According to DORA, current state laws have no significant chartering or licensing requirements that would block regulated entities from providing banking and financial services to the Colorado marijuana industry, and the Associated Press reported that some banks already work quietly with such businesses. But the majority of dispensaries are still largely cash operations that don't allow credit or debit card purchases, and find themselves as targets for theft because of that. Attaining loans is also a significant challenge, according to marijuana business owners.

In 2018, the Federal Reserve Bank gave conditional approval to a Colorado credit union to work with marijuana-related businesses, but the credit union can't serve growers, dispensaries or other businesses that directly touch the plant until the federal government legalizes such practices. In the meantime, banks and credit unions have told federal officials that they are hesitant to serve marijuana businesses while no explicit protections for them are in place.

“Unbanked cannabis businesses often operate solely in cash, creating a significant risk to public safety,” said Colorado Treasurer Dave Young during the plan's announcement. ”By providing essential banking services to cannabis businesses, Colorado can lead the way in protecting public safety and promoting financial transparency.”

The move comes days after a bill was introduced in the Colorado Legislature that would allow state-chartered banks and credit unions to loan money to marijuana business owners. Sponsored by state representatives Matt Gray and Hugh McKean, House Bill 1217 follows DORA recommendations. "This is a problem we very much need to solve," Gray says in a text message to Westword.

All of the moves by state lawmakers would protect financial service providers at the state level, but larger entities with national operations are still looking at the federal government for clearance before working with the pot industry. Even Colorado-based  financial outfits could theoretically be in danger of federal discipline, DORA warns.

"Given the considerations at the federal level, Colorado state-chartered financial institutions seeking to serve state-licensed cannabis-related businesses is a business decision that should be made on the institutions’ specific business objectives, an evaluation of risk, and the capacity to manage effectively," the state's new Roadmap to Cannabis Banking reads.

Congressman Ed Perlmutter's SAFE Banking Act — a bill that would protect banks serving legal marijuana businesses from federal prosecution — passed the U.S. House of Representatives last September, but is still waiting for a hearing in the Senate. Perlmutter, who joined Polis and DORA officials at the Roadmap announcement, repeated his pleas for Congress to address marijuana banking at the federal level.

“I appreciate Governor Polis and his team working to improve access to the financial industry for Colorado cannabis and cannabis-related businesses. However, it is critical that Congress acts, including by advancing the SAFE Banking Act. Only by aligning state and federal law can we fully resolve the issues necessary to get cash off our streets and improve public safety in our communities,” he said.

Find the full outline of Colorado's new marijuana banking plan below.