Congress Should Let Marijuana Businesses Have Access to Banks

There are stories of marijuana business owners showing up at California's tax agency offices with trash bags filled with cash, even though the agency generally doesn't allow cash payments.


In a free and just society, laws should be clearly designed and easy to follow so that honest people know the ground rules and can live their lives without fear of running afoul of the government. In fact, it's the mark of a tyrannical society when laws are contradictory and murky, thus leaving people unable to easily comply despite their best intentions.

Now consider the plight of marijuana businesses in the 33 states and the District of Columbia where either medical marijuana or the adult use of recreational marijuana is legal. State laws, either through voter initiative or legislative action, have allowed these businesses to exist, but federal restrictions force them to operate in a gray area.

The most maddening example involves banking regulations. Marijuana businesses are required to pay excise taxes, but have largely been denied access to banking, insurance and financial services that would facilitate those payments. Fortunately, a measure that will help these businesses use basic financial products passed the House in late September but faces tougher going in the Senate, where a committee vote is expected this fall.

Sponsored by two Colorado lawmakers, Rep. Ed Perlmutter (D) and Sen. Cory Gardner (R), the federal Secure and Fair Enforcement (SAFE) Banking Act signals a bipartisan recognition in Congress of this frustrating problem by protecting banks and credit unions from federal sanctions for providing financial services to legal cannabis businesses.

This effort is long overdue. One need not even like the idea of marijuana legalization to realize the perverse consequences of a banking prohibition. Because the federal government considers the cultivation, sale, transportation and possession of marijuana to be a crime, it threatens banks, credit unions, credit card companies and payroll companies with huge liabilities, the loss of federal deposit insurance and even prosecution if they do business with cannabis businesses.

As a result, most of these cannabis companies are stuck in a cash market, which leaves them vulnerable to crime and allows dubious players to flourish. That also provides a Catch-22 situation. In California, for instance, medical marijuana has been legal since 1996, yet 23 years later it's still unclear how those businesses are supposed to pay their tax bill. There are stories of marijuana business owners showing up at the state's tax agency offices with trash bags filled with cash, even though the agency generally doesn't allow cash payments.

Similar stories occur in other states with legal cannabis sales. Sure, governments tend to be maddeningly bureaucratic and inefficient in general, but you'd think they could at least come up with a simple way to collect their own tax revenues. It's also difficult for state regulators to audit cash businesses, so that's another incentive for lawmakers develop a reasonable method to help honest players play by the rules.

The situation is equally bizarre when cannabis companies try to pay federal taxes. "Although cash payments are not explicitly required by the IRS, an estimated 70 percent of all legal cannabis businesses are unbanked," according to a recent article in Quartz. It quotes a Colorado-based accountant who notes that "99% of banks don't want to mess with them (because) there's a lot of internal compliance if you're going to serve the cannabis industry."

State officials have long been aware of the problem. California officials, including Republicans opposed to legalization, have called on the federal government to legalize bank accounts for marijuana businesses. Thirty-nine state attorney generals recently asked Congress to lift the virtual ban on banking for the marijuana industry.

The SAFE Banking Act reaffirms the concept of federalism—that states can set their own policies on many matters, including marijuana—and promotes some basic American ideas of liberty. We all understand the need for taxes and regulation, but those regulations should be predictable, logical and designed to promote, rather than frustrate, compliance. They should provide a legal framework so that good actors don't live in fear of government reprisal.

This column was first published in the Boulder (Colo.) Daily Camera.

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  1. This is ridiculous – wasn’t HSBC found guilty of laundering money for drug cartels for years?? Open the damn banks for the little weed shop over in Fort Morgan Colorado. I promise it won’t hurt. And that way the cashier and the “bud tender” can open a fucking Roth IRA finally.

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      1. So that‘s how HSBC launders their funds, huh?

  2. I live in Humboldt county, with a lot of legal and illegal growers. There is a lot of gun crime because of the lack of access to banking. People come up here from Southern California and the Bay Area knowing that, if they can identify a successful grower, there is a high probability of cash on the premises.
    On the flip side, Beto O’Rourke’s plan to confiscate guns is unpopular here for some reason.

    1. Perhaps the time has come for the Guns and Dope Party to come into its own.

      1. Check out the Lost Coast Outpost e-newspaper. Even county supervisors recognize the problems.

      2. Austin Peterson approves (or at least he used to until he switched parties).

  3. >>protecting banks and credit unions from federal sanctions for providing financial services to legal cannabis businesses.

    so when federal sanction intake < weed tax intake

  4. The crusade against marijuana has created a formidable black market the existence of which has been used to justify a wide array of intrusive government policies. Eliminating the black market entirely would leave the government hard pressed to justify the continued militarization of domestic police forces.

    In addition, the expansion of a legal market for marijuana has led to accusations of racism by drug dealers who happen to be minorities; and that scares the living daylights out of the progressives. The argument is that legal marijuana businesses are nothing but a cover for privileged white Americans to misappropriate the goodwill of hard working minority drug dealers, who for decades have exploited the black market, built up goodwill, normalized marijuana use, and will now be put out of business. Deliberately keeping the industry in the grey zone, therefore, helps to sustain a criminal undercurrent.

    So, while progressive states move toward legalization, they are nevertheless wary of losing two things: (1) broad police powers, and (2) the electoral support of minority residents. I think the same dynamic is at play at the federal level. As long as Democrats control the House, or come to control the Senate, or control both chambers of Congress, it is almost certain that access to federal banking will remain out of reach.

    Crime pays; without crime, the government loses power and votes. Political opportunism and an inclination toward authoritarianism all but guarantee that the grey market will be status quo for years to come.

  5. Another case where the HR has passed bills. Lets hope that Senator McConnell will let this one pass through. Kentucky has not yet passed any marijuana bills so he may not care.

    While I at it, its is time that the Wisconsin Republicans controlling the Legislature update Wisconsin’s marijuana laws. At least allow medical marijuana. More would of course be nicer.

    1. On October 16, 1929, Congress appropriated 10 million gold dollars to establish two “narcotic farms,” which today would be called prison rehab centers. One of these was to be installed in Kentucky. Indeed the Porter Bill in 1931 got the thing afoot at Lexington. So Kentucky may still have a vested interest in rape cages for victimless victims of sumptuary legislation. Supply of someone else’s money creates demand for more coercion at gunpoint. Q.E.D.

  6. Congress should lack the authority to block innocent people from using banks.

  7. “…the federal Secure and Fair Enforcement (SAFE) Banking Act signals…”

    Coming up with ‘clever’ names for laws ought to be a hanging offense.

    1. lazy and barely clever to use “and” as a capital A in the SAFE

  8. For any federal taxes, shouldn’t these businesses be filing 5th amendment statements anyway?

    1. Manly Sullivan, Carolina lawyer, used car dealer and bootlegger tried that. The Circuit court agreed but Mabel Willebrandt convinced Theironners in US v Sullivan (1927) and US v Marron, same year, that the Bill of Rights should no more interfere with exorcising the Demon Rum than the 13th Amendment should stop press gangs from sending kids to the trenches Over There in 1918. Germany’s banking system and securities markets began their crash during the Sullivan case–Germany was the largest exporter of the heroin that replaced beer and rum at the time. Many U.S. banks were soon investigated for financing liquor and drug cartels, hence the Crash.

  9. Greenhut doesn’t get it. Two days before Hoover was sworn in, Congress passed and Coolidge signed the Jones Five and ten law making beer a chain-gang felony with a asset forfeiture and a fine in cash worth 30 pounds of gold. Prosecutor Willebrandt quit and published a book abt dry law enforcement in 20 papers in Aug-Sep 1929, and the market never recovered as of Sep 2, when the Clarke Brothers bank was busted. Money fled raided banks and brokerages and the rules of fractional reserve banking translated that into liquidity crunches and massive withdrawals–like in 2008, with plant leaf drugs. Republicans will never admit prohibition caused the several crashes, and their policies are STILL designed to crash banks.

  10. “Congress Should Let Marijuana Businesses Have Access to Banks”

    Yet Reason could only cheer when any partial legalization occurred as if the war on drugs was over !

    In fact I am nit sure I ever heard Reason mention the legalization as only partial.

  11. Great piece. The vast majority of the public has no idea what legitimate cannabis businesses must go through. The fact that pot is still Schedule I is an embarrassment. Just another example of government corruption at the hands of moneyed interests.

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