However, guidelines issued by the U.S. Department of Justice are so strict that they will probably prohibit pot shops in California from taking advantage of this new opportunity.
The DOJ's memo laying out the guidelines for banks that want to jump into bed with cannabis retailers says this:
In assessing the risk of providing services to a marijuana-related business, a financial institution should conduct customer due diligence that includes: (i) verifying with the appropriate state authorities whether the business is duly licensed and registered; (ii) reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business ...
Unfortunately for dispensary operators, California doesn't license dispensaries. State legislators have tried to impose regulations on shops, but they've pretty much failed.
Some cities provide licenses, and dispensaries can obtain nonprofit permissions from the state, but that doesn't really equate to state licensing. California pot shop licenses simply don't exist.
Michael Chernis, an attorney who represents cannabis operators in greater L.A., told us the news today is a mixed bag for the state that put legal, medical marijuana on the map:
It's not a home run. Some of those things the banks are obligated to consider are going to disqualify a lot of local dispensaries, perhaps all of them. California has been unable to draft legislation that provides any statewide licensing scheme.There's no state mechanism for licensing a medical marijuana business, let alone getting permission to operate one. I can see a lot of banks looking at this language and saying we can't verify you are duly licensed and registered.
Chernis said it's possible some banks will be persuaded to let city licenses fulfill the requirements, but he notes that the institutions will have the option to say no regardless of their business license status.
The guidelines also note that banks will have to file suspicious activity reports and transaction activity reports with the Department of Treasury where necessary. This is good and bad. It makes the marijuana business more transparent, but it will also surely make some operators uncomfortable knowing Uncle Sam is watching their money closely.
As it is, most pot shops in the medical marijuana capital of America, L.A., are cash-only businesses. Some operators, Chernis says, use personal bank accounts to keep their business transactions under the radar. But for the most part dispensary revenue is murky.
DAG Memo - Guidance Regarding Marijuana Related Financial Crimes 2 14 14
Overall, the attorney thinks the new stance by the Obama administration is a positive step:
In the big picture it's a major leap forward. I always believed that once you get banks financially incentivized to take on this business, legalization is only days away.
Ethan Nadelmann, executive director of the Drug Policy Alliance, said this today:
I'm impressed by how the White House is trying to make this work, especially given the inability of Congress to do anything constructive in this area.
U.S. Rep. Jared Polis of Colorado sent out this statement today:
These guidelines demonstrate that the Attorney General recognizes the importance of granting legal marijuana businesses access to banking services available to all other legal businesses.
Marijuana activists say the next big step - and it's one President Obama could seemingly take without having to beg Congress to pass a law - is to reclassify marijuana from Schedule I, which is comprised of drugs including LSD and heroin deemed by feds to have zero legitimate medical use, to the more legit Schedule II or even III.
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The Obama administration today took one small step for stoned kind by essentially saying banks are now allowed to do business with marijuana dispensaries.