The $6.7 billion cannabis industry is hoping that a new crop of state ballot legalization measures in Tuesday's elections will mark a major inflection point in its long-running fight for acceptance in Washington.
While pot sales are legal today in 25 states, a decades-old federal ban continues to cast a long shadow on the sector's legitimacy. Banks and credit unions remain reluctant to work with marijuana firms, many of which have been forced to operate on a cash-only basis.
As more states have legalized marijuana, the Obama administration has taken some intermediate steps aimed at lowering the tension between state and federal laws, including 2014 Financial Crimes Enforcement Network guidance suggesting that financial institutions will not be punished for serving the legal pot industry as long as they take certain precautions. Still, less than 3% of the nation's banks and credit unions have relationships with marijuana businesses, according to the most recent government data.
Pot advocates argue that as more states legalize the drug, there will be growing pressure on Congress and the executive branch to provide stronger assurances that the pot business and the banks that serve it will be safe from federal interference.
That is where Tuesday's elections could have a substantial impact. Voters in nine states will decide on ballot initiatives to legalize the drug in some form. The list includes California, which is deciding whether to approve the drug for recreational use, and Florida, where the issue is whether medical marijuana should be legal. Ballots will also be cast in Arizona, Nevada, Montana, Massachusetts, Maine, North Dakota and Arkansas.
For the banking industry, this week's votes are unlikely to have a direct effect. But if the state-level results spur action by Congress, the impact could be substantial.
Beth Mills, a spokeswoman for the California Bankers Association, said that her group's members do not have a position on whether marijuana should be legalized at the federal level. But she did voice frustration with what she described as a lack of clarity from Washington.
"One would think that at some point Congress is going to have to act," Mills said.
If all nine ballot measures get approved, roughly 62% of U.S. residents will live in states where pot is legal, according to the National Cannabis Industry Association.
Federal lawmakers from states like Oregon and Washington, which have already legalized recreational pot, have been leaders in the push for changes in federal law. The pot industry is betting that state-level victories on Tuesday will bring more members of Congress to its point of view.
"It moves slow here on … [Capitol] Hill," said Robert Capechi, director of federal policies for the Marijuana Policy Project. "I'm hopeful that the results on Tuesday will get us to that critical mass."
California has 55 members of Congress, more than any other state. One of them is Rep. Dana Rohrabacher, a Republican from Orange County who has long been an advocate for legal cannabis. He has been tracking pre-election polls, which suggest that California voters are likely to approve the recreational pot measure.
"It should get at least 55% of the vote," Rohrabacher said. "That type of a solid win would certainly send shockwaves across the country."
Support for the pot industry in Washington does not fall along party lines, but the outcome of U.S. Senate races — which will determine which party controls the chamber — could have an impact on federal cannabis policy.
Senate Judiciary Committee Chairman Charles Grassley, R-Iowa, a marijuana opponent, will lose his gavel if the Democrats gain control of the Senate. His likely successor under Democratic control, Sen. Patrick Leahy of Vermont, is much more sympathetic to the industry.
Of course, the impact of Tuesday's marijuana votes will go well beyond the banking access issue. How quickly the pot industry will grow also hangs in the balance.
Privateer Holdings, a Seattle-based cannabis company that is working in several countries, last week announced $40 million in convertible bridge financing. That financing is expected to convert into equity funding when the firm completes its next round of financing.
Asked when the firm's next financing round will close, Chief Executive Officer Brendan Kennedy responded: "I would say ask me next Wednesday, after the election."