In an utterly predictable ruling, a federal judge recently dismissed a lawsuit that sought approval for the establishment of a credit union for marijuana businesses in Colorado.
Much as we favor such a credit union, why would anyone expect any other outcome?
Judges, after all, look at issues through the lens of the law. And while marijuana continues to gain footholds as a legal drug on the state level, at the federal level it remains an illegal substance. What else was the judge to do?
U.S. District Court Judge R. Brooke Jackson expressed sympathy for pot businesses struggling under the current system, but in his order he said the courts simply could not “look the other way.”
Colorado created Fourth Corner Credit Union last year with the intention of serving the marijuana industry.
An estimated 40 percent of Colorado marijuana businesses are without a bank, which means hundreds of millions of dollars in cash are unsecured in Colorado. That is a huge safety issue.
Nevertheless, the U.S. Federal Reserve Bank of Kansas City said it could not take deposits or issue credit to the credit union because the drug is still federally illegal.
It was a leap to think the Federal Reserve or the courts would ignore federal law.
Congress needs to act to fix the banking issue. And that may be a long time coming in this Republican-controlled Congress.
Colorado Rep. Ed Perlmutter’s Marijuana Businesses Access to Banking Act, introduced in April, is the right move to fix the problem. But it was sent to committee, where it has languished.
The bill, which has 33 co-sponsors, seeks to resolve conflicts between state and federal laws around pot. Specifically, it would provide “safe harbors” and additional civil protections for banks working with marijuana businesses. For example, regulators would not be able to threaten or limit a bank’s deposit insurance, take any action or downgrade a loan made to a pot business.
It appears to be a sensible solution. Time will tell. As more states legalize marijuana, it is likely that the mood will change on the federal level around banking regulations. But that change needs to happen in Congress before it will occur in the courts.