Is Medical Marijuana Banking Coming Soon?

Missouri voters will decide three ballot measures in November

by Max Cook, MBA President and CEO

Max Cook, MBA President & CEOOn Nov. 6, Missourians will go to the polls to cast their ballots on a number of races, proposals and initiatives. Among those items on the ballot are three medical marijuana-related initiatives — Proposition C, Amendment 2 and Amendment 3. Proposition C would amend Missouri statutes while Amendments 2 and 3 would amend the Missouri constitution. All three are similar in nature and yet are different in some of the particulars like tax rate, how the taxes will be used and who will regulate the activities associated with the growth, cultivation, processing, warehousing, dispensing and use of the marijuana.

The reason I bring this up is if voters approve one or more of these initiatives, our industry will be thrust into a dilemma that has been playing out in more than 30 states across the country. That dilemma is the fact that we will have state law that permits the development of the medical marijuana industry while it remains illegal under federal law. This conflict between state and federal law creates concern for both state- and federally-chartered banks that rely on federal agencies for regulatory oversight, insurance and access to funding and the payment system.

There is little doubt in my mind that a majority of you will not risk providing depository or lending products and services to marijuana-related business because of this conflict. Like we have seen in other states, this will leave a state-legal business sector largely without access to banking products and services. This is a growing concern nationwide because of the increase in public safety issues arising out of an industry that currently operates mostly in cash. In addition, there are challenges ranging from processing customer payments to recordkeeping and tax collection.

The Office of the U.S. Attorney General and FinCEN have both attempted to provide guidance, but neither have been very successful. The guidance was insufficient because it did not change federal law, posed significant compliance burdens, was subject to inconsistent interpretation among bank regulators and was temporary.

So, what is it going to take to clear the air of all the conflict and uncertainty? Congress will have to act, and it’s not a simple issue to put your arms around. We have medical versus recreational marijuana, which are two totally different businesses and sets of issues. You have growth, cultivation, processing, transportation, warehousing, distribution, dispensing, consumption and taxation issues that would have to be addressed. In other words, how do we regulate and tax? To date, there has been little appetite in Washington, D.C., to address these issues.

So, what are you supposed to do? These marijuana-related businesses are going to need employees, warehousing space, retail space, etc. You can’t finance it directly or indirectly without taking on an undue amount of risk. What about the customer who you are financing warehouse space for and now that customer wants to rent to a marijuana business? The same goes for retail space you have financed. What about the employees of marijuana businesses? Can you bank them? Their bank accounts are now full of funds derived from the marijuana business!

I guess my point is that none of us can bury our heads in the sand. We at the MBA will do everything in our power to educate ourselves so we can help you work through all the issues that will pop up. As for you, I highly recommend that someone on your team become the expert on this issue. We have posted resources for your review. None of us can afford to be caught off guard on this. Do your homework!! 

Cannabis Banking Resources