Pot banking takes off in U.S. as women forge path around ban
A federal prohibition on marijuana has locked U.S. banks out of an industry surging toward $75 billion in sales. Who's catching that money? A small number of local credit unions, and the women who run their operations.
Sundie Seefried's credit union near Denver has only six branches, but last month it raked in $160 million from cannabis-related ventures desperate for a place to stow cash. As chief executive officer of Partner Colorado Credit Union, she assembled a 13-person team that screens those companies, accepting about 200. Depositors don't collect interest — they pay fees for due diligence.
"I tell my clients, if I go to prison I better have enough money in my account for cigarettes," Seefried quipped in an interview. But seriously: "Did I ever see myself trying to solve this national problem? Never. But can I just drop it and walk away? I can't."
Big banks can't touch money from pot without risking severe punishment by the federal government, potentially including the loss of their national charters. Many credit unions, on the other hand, are regulated by states. As more of those jurisdictions move to legalize weed, a number of lenders are building units to soak up billions of dollars generated by growers, dispensaries and related companies.
Women are the backbone of credit unions. They run more than half of the nation's institutions and account for about 70 percent of the workforce, according to a study last year by the Filene Research Institute. And as it happens, several of those women are now rising to national prominence within their industry as pioneers of pot banking, speaking at conferences and getting to know thousands of entrepreneurs.
The divergence of credit unions and banks over cannabis has only grown starker in recent months. Ahead of midterm elections, Wells Fargo & Co. cut off services to a pro-medical marijuana politician because of contributions she received from lobbyists. The bank said it absolutely can't touch cash linked to weed. Credit unions, meanwhile, watched voters create three more potential markets last week by backing measures to legalize cannabis for recreational use in Michigan and medicinal use in Missouri and Utah.
Seefried was on the brink of retirement almost half a decade ago when attorney friends persuaded her to give pot banking a closer look. Now she spends her days talking with entrepreneurs and regulators about the cash her firm oversees for startups, as well as venture funds seeking ways into the business. She's amassed more than 3,000 LinkedIn connections — many from the world of weed — while delivering 56 speeches in just two years.
"I have to get some life balance back," she said, pledging to limit her appearances on stage next year.
Carmella Houston, another credit union executive prominent for her work with pot ventures, predicts federal legalization is a few years away, and that banks will then rush to help that market. For now, she's building up a head start.
As vice president of business services at Salal Credit Union in Seattle, she runs a 10-person team that banks over 500 pot-related companies in Washington and Oregon. A former commercial loan officer, she turned her attention to marijuana businesses in 2014 after her son, who worked in the industry, complained about the challenges entrepreneurs were facing.
In finance, building a franchise ahead of competitors can create an edge that lasts for decades. But in this case being first is unusually fraught. "You could equate it to banking a liquor store during Prohibition," Houston said.
U.S. banks can look north to get a sense of what they're missing. Canadian pot ventures have been among the country's hottest stocks this year, some surging more than 1,000 percent before the country nationally legalized recreational marijuana last month.
A wave of mergers and takeovers may soon ensue, according to AltaCorp Capital Inc., creating ample opportunities for well-connected investment bankers to generate fees. Credit unions typically lack those operations, focusing on traditional banking services, such as guarding deposits, moving cash and lending. Many have missions focusing on certain customers or communities.
"We didn't get into it for the profits," said Lynn Ciani at Numerica, a credit union based in Spokane Valley, Washington. She was a lawyer in private practice before joining the lender, where she oversees legal risks. The company was concerned that if local pot ventures couldn't find banks, the unprotected cash hordes would attract robberies, she said. It now has almost 300 pot-business clients.
"Before recreational marijuana was legalized, there was a decriminalization of medical marijuana in the state of Washington, and you would read stories about home invasions and people having violent crime committed against them because they owned a dispensary," Ciani said. "We didn't want that crime in our communities."