Judge Dismisses Lawsuit by Credit Union Trying to Serve the Marijuana Industry

A federal judge says letting the credit union use the Federal Reserve's payment system "would facilitate criminal activity."

Fourth Corner Credit Union

Yesterday a federal judge dismissed a lawsuit by a credit union that was founded to serve Colorado's newly legal marijuana industry but has been unable to operate because it cannot gain access to the Federal Reserve's payment system. U.S. District Judge R. Brooke Jackson said he cannot issue the injunction sought by Fourth Corner Credit Union, requiring the Federal Reserve Bank of Kansas City to assign it a "master account," because marijuana is still prohibited by federal law. Jackson agreed with the reserve bank that allowing the credit union to use the Federal Reserve system "would facilitate criminal activity."

Jackson was unpersuaded by Fourth Corner's argument that letting the credit union operate was consistent with 2014 memos from the Justice and Treasury departments that were aimed at facilitating banking services for state-licensed cannabusinesses. He said those guidance documents, which he described as "nothingburgers" at a hearing last month, "simply suggest that prosecutors and bank regulators might 'look the other way' if financial institutions don't mind violating the law." The memos do not change federal law, he said, and "a federal court cannot look the other way."

Jackson nevertheless expressed sympathy for Fourth Corner and for marijuana businesses that are forced to bear the logistical burdens and security risks of dealing exclusively in cash because they cannot find banks willing to serve them. Despite the Obama administration's signals of forbearance, most financial institutions remain leery of accepting cannabis cash because of the legal hazards associated with it. "I regard the situation as untenable," Jackson wrote, "and hope that it will soon be addressed and resolved by Congress."

Aaron Smith, executive director of the National Cannabis Industry Association, agrees that congressional action is necessary. "This ruling sends a message loud and clear: Congress must act," he said in a press release. "There's no shortcut, there's no band-aid, there's no work-around to fix this industry-wide. Forcing cannabis businesses to operate without banking access is a crisis, affecting public safety, law-abiding businesses, and the state officials in charge of regulating them. It's time for Congress to do its job and fix the problem."

Comments

[robc]

A technically correct decision, which based on recent history, means scotus should overturn with insanely tortured logic.

[Overt]

When are MJ shops going to start accepting bitcoin?

[Hamster of Doom]

You drew the dawn watch, eh? And I bet you're a west coaster. Isn't that how is always works out? Bosses are bastards. *sympathizes*

Have some more coffee, you're doing great!

[UnCivilServant]

I suspect he may still be up from yesterday.

[sloopyinTEXAS]

Doesn't Sullum live in the DFW metroplex?

[Hamster of Doom]

Forcing cannabis businesses to operate without banking access is a crisis, affecting public safety, law-abiding businesses, and the state officials in charge of regulating them.

Other known side effects: mosquito breeding populations increase, wildfires are 12% larger at their peak, and may cause psoriasis.

[WTF]

Where is the constitutional authority for the federal government to ban marijuana? Did they pass an amendment allowing them to implement such a law, like they had to do to implement the Volstead act? Oh, I forgot, the constitution is like a hundred years old and hard to understand, so FYTW.

[Fist of Etiquette]

The memos do not change federal law, he said, and "a federal court cannot look the other way."

I look forward to a similar ruling on another matter about federal law and executive pronouncements in the coming weeks.

[widget]

Jackson nevertheless expressed sympathy for Fourth Corner and for marijuana businesses that are forced to bear the logistical burdens and security risks of dealing exclusively in cash because they cannot find banks willing to serve them.

I could die and go to heaven if my business was forced to deal exclusively in cash. I wonder why people petition the government for favors that are contrary to their to self interest.

[sloopyinTEXAS]

Because dealing in plastic probably increases their business by a couple orders of magnitude.

Cash only businesses are a thing of the past, unfortunately. Especially with so many "children" in their mid-20s living off of mommy and daddy's AMEX.

[SugarFree]

And acting as much as a "normal" business as possible is a valuable commodity in their precarious legal state.

[sloopyinTEXAS]

Not to mentions n that they want access to the FRB system to probably do cash flow loans for inventory replenishment and payroll.

When they call their suppliers and say they need $50k in product but need to pay COD, that doesn't fly. When they go to make capital improvements, their vendors probably want a bond or want to hold money in escrow for the work, cash won't do.

[widget]

That's a really bad idea. Marijuana dispensaries are not building airplanes. If you can't a float a $50k inventory on a small business you shouldn't be in business.

[Overt]

So you every small business needs $50,000 in cash laying in a safe somewhere?

[sloopyinTEXAS]

Not to,mention that every time they need to do a transaction with someone out of town, they have to transport the cash there if they want to avoid the oversight that goes with taking $50k to get a cashiers check.*

*And they better drive because taking that much money on an airplane will get you stopped and probably get the money seized. And if you do drive, hope you don't get pulled over and searched because that much cash on hand is a sign of being up to no good and will likely get it seized.

[sloopyinTEXAS]

What if,you have to float that $50k, float a month's payroll and float your ad valorem taxes all at the same time your insurance premiums are due? Do you really want to be toting that much cash around at once because you're perpetually afraid the Feds will freeze your accounts any time they feel like it?

Come on, man. Even if you deal in a cash only business, you would be silly to not put a good bit of the money in a bank to mitigate the risk of a total loss due to a theft, fire or other potential disaster.

[Mainer2]

Folks, this is a man who has run a business. Inventory, payroll, insurance...the kind of nuts and bolts that one can only appreciate if you actually run a business.

[kbolino]

If you can't [do arbitrary bullshit that has no connection to the business], you shouldn't be in business

Where have we heard this before...

[Jerryskids]

Better hope your business never gets caught doing an aggregate of over $10k worth of business. You do $10k in cash in one whack and that's money laundering, $10k cash in aggregate is structuring to hide the fact that you're a dirty money launderer. Actually, don't try to skate by by doing less than $10k in cash, either - doing less than $10k in cash is probably some sort of criminal attempt to hide the fact that you're trying to hide the fact that you're a crook.

[widget]

Everyone knows that Jerryskids. But somehow Chinese dim sum restaurants operate on cash without the owner going to jail.

[dantheserene]

Perhaps because grease isn't only applied in the kitchen? Chinese restaurants are low value targets to prosecuters. No one is looking to make a name for themselves by disrupting brunch.

[Jerryskids]

Good for this judge, refusing to cut corners on the law just because it's for a just cause. But I don't have much hope that this is going to be a wide-spread reaction to other "just causes". DoJ memos of understanding do not constitute the law, nor do memos from any other department. That includes "Dear Colleague" letters from the Department of Education regarding due process in campus sexual assault hearings.

But I still have to argue that this is not something that requires Congressional action - Congress already has acted by writing right into the law a stipulation that the Attorney General, an office within the Executive Branch and therefore under the command of the President, can change the schedule classification of marijuana. I.E., Obama can, with the stroke of a pen, make it so that marijuana use or possession or cultivation or sales is no longer a violation of federal law. (Despite what Obama told Jake Tapper and then seemed rather aggravated when Tapper insisted on arguing that no, legalizing marijuana does not in fact require Congressional action.)

[FreeRadical]

This judge got it right, unfortunately, and his "nothingburgers" is genius. Those "memos" were shit from the beginning, and not worth the napkins they were written on.

[kbolino]

his "nothingburgers" is genius

We're really setting some low standards for "genius" these days.

[FreeRadical]

Umm, yeah... How about clever?

[Judge Forrest's Clitdong]

Prohibition is a jobs program for uptight pricks.

[Gene]

This. I surprised how many drug warriors don't even know who he is.
What he did to Billy Holiday is beyond redemption, not that anyone would ever think he was due any.

[Gene]

*Billie, ugh.