Federal Reserve Blocks 'Marijuana Bank' in Colorado

Many legitimate marijuana businesses are still locked out of the financial system.

Marijuana-related businesses in Colorado are so profitable that the government doesn't know what to do with all of the tax revenue they're generating. But business owners face a more immediate problem: Where to stash their own profits when banks won't take it.

Because marijuana is a federally banned Schedule I substance, most banks have been reluctant to accept deposits from industry businesses. A  clumsy and ambiguous set of guidelines from the federal government, which at least seemed to indicate that banks working with dispensaries operating legally under state law would be shielded from money laundering prosecution, didn't help.

Now the Federal Reserve is muddying the waters further with a court filing against the Fourth Corner Credit Union, which was established specifically to handle Colorado's marijuana cash, according to NBC News: 

The credit union can't open without clearance from the Federal Reserve, which said in its filing that "transporting or transmitting funds known to have derived from the distribution of marijuana is illegal…"

The Federal Reserve said in the latest filing that bankers won't be led away in handcuffs for taking marijuana money, but they don't have the right to put that money in the Federal Reserve system.

By pushing for approval from the Fed, it was "as if Colorado enacted a scheme to allow trade in endangered species or trade with North Korea," the filing says.

Earlier this year, Reason TV looked into the precarious financial situation that unbanked Colorado business owners find themselves in. We profiled Blue Line Protection Group, a security service that protects the mountains of cash changing hands on a daily basis in the state.

Watch that video above, and click here for the full text, associated links, and downloadable versions.