A federal judge has rebuffed a legal challenge by a credit union in Colorado that was set up to serve the marijuana industry but then denied access to the U.S. payment system.
The highly anticipated ruling is a setback for the pot industry, which has been hobbled by the unwillingness of many banks and credit unions to facilitate a business that remains illegal under federal law.
Fourth Corner Credit Union was organized in 2014 to provide banking services to state-licensed pot businesses, and was granted a state credit union charter. But the Federal Reserve Bank of Kansas City denied the credit union's application to open a so-called master account. Those applications are normally approved as a matter of course within a few days, and are necessary for the electronic transfer of funds.
Fourth Corner sued the Kansas City Fed, asking U.S. District Judge R. Brooke Jackson to issue an injunction that would result in the approval of its application. At a Dec. 28 hearing in Denver, the judge urged Fourth Corner and the Kansas City Fed to reach a settlement.
But that plea went unheeded, and on Tuesday the judge issued a ruling denying Fourth Corner's request for an injunction.
The judge did express sympathy with the plight of the marijuana industry in Colorado and elsewhere, but said that he cannot encourage financial institutions to violate federal law.
"A federal court cannot look the other way. I regard the situation as untenable and hope that it will soon be addressed and resolved by Congress," Jackson wrote.
A spokesman for the Kansas City Fed declined to comment on the ruling. Fourth Corner had no immediate comment.
"This ruling sends a message loud and clear -- Congress must act," Aaron Smith, executive director of the National Cannabis Industry Association, said in a press release. "There's no shortcut, there's no Band-Aid, there's no work-around to fix this industry-wide."