Colorado lawmakers on Wednesday passed a bill to establish a financial services co-operative to serve licensed marijuana dispensaries in the state.
The approval of "cannabis credit co-operatives" came on the final day of the legislative session. The final approval came after both chambers of the General Assembly cleared their own versions of the bill. The bill now heads to Democratic Gov. John Hickenlooper for his signature.
"We are very happy this legislation passed," Andrew Freedman, the governor's marijuana coordinator, told USA Today. "This gives us an avenue to go to the Federal Reserve and get cash off the street. That was by far our No.1 priority."
The cooperative would create a financial institution that would allow licensed marijuana dispensaries to put their money in a regulated institution where they could get their cash into the Federal Reserve system, Chris Myklebust, Colorado commissioner of financial services and a technical adviser on the bill, told Credit Union Journal.
The state will charter the co-ops after a lengthy review process which will only take place after a co-op is first approved by the Federal Reserve for acceptance to utilize the Fed payment system. These new financial institutions will be uninsured financial services cooperatives regulated by Colorado's Division of Financial Services.
Banks and credit unions are not eligible to be a member of a cannabis co-op. Myklebust said this structure would remove the argument over whether CUs or banks in Colorado should accept deposits from licensed marijuana dispensaries.
Pot Banking Primer
In February, federal authorities took their most forceful step yet toward bringing state-licensed marijuana businesses into the financial mainstream when the Financial Crimes Enforcement Network issued guidance that was intended to reassure credit unions and banks that doing business with legal pot shops will not land them in hot water.
"We have been very careful to make sure no one will confuse this cannabis credit cooperative with a credit union," Myklebust said. "It would be formed under an article of Colorado law. There is no reference to a common bond or anything that would confuse it with a credit union. It is taxable at federal, state and local levels, and most important, it is uninsured."
Myklebust pointed out that banks and CUs have not accepted deposits from marijuana dispensaries because under federal law they could be criminally liable for the actions of the dispensaries' customers.
Because marijuana is still illegal under federal law, marijuana businesses in the 20 states that allow the drug's sale for medicinal or recreational purposes often have a hard time finding financial institutions that are willing to be their partners.
Consequently, marijuana merchants often act as cash-only businesses. This has sparked fear that the shops will be targets for robberies, as well as concern that the businesses could be used to launder money.
House bill 1398, sponsored by Rep. Jonathan Singer (D-Boulder), had been given only a small chance to pass in the eyes of its supporters, who saw the effort as little more than an attempt to place federal authorities on notice that they must address the problem of licensed marijuana dispensaries having no access to financial services.
Previous efforts in Colorado to establish a state-chartered bank and a medical marijuana cooperative to serve the marijuana industry failed.
The bill encountered a stiff challenge as it worked its way thru the state legislature, gutted during one of the hearings by Colorado's Committee on Business, Labor, Economic and Workforce Development, and then reinstated in the following committee meeting.