Some Colorado legislators want to plant a financial seed for the state’s legalized weed industry.
Under federal pressure, banks have stopped lending openly to Colorado’s medical marijuana shops, so state politicians introduced a bill in the state Senate on Thursday that would allow for a cooperative banking system just for the pot dispensaries.
“The state has taken great strides to legitimatize and regulate the medical marijuana industry,” said Sen. Pat Steadman, a Democrat, who is co-sponsoring the bill with Republican Rep. Tom Massey. “But our biggest challenge is finding banks that will serve them. We need a statewide solution to work around problems that find their origin in federal law.”
Senate Bill 75 would enable independent parties to create “exclusive financial cooperatives” subject to the same regulations as credit unions, except that they would be insured by “non-federally backed” insurance policies.
“I’ve promised never to use the term ‘credit union,’ ” Steadman told The Daily.
Although Colorado laws allow marijuana use for medical reasons, the state's banks stopped working publicly with dispensaries after the Justice Department threatened to crack down on even state-licensed medical marijuana shops last summer. Robert Friechtel, director of the Medical Marijuana Business Exchange, speculated that half of Colorado’s 700 dispensaries lost their bank accounts last September, when Colorado Springs State Bank became the last to shut out the industry.
“Forcing dispensaries to go cash-only is crazy,” Friechtel said. “How can owners safely and successfully run their businesses without any place to deposit money?”
Dispensaries have been forced to get creative to stay afloat.
One Colorado Springs shop owner, who asked to remain anonymous, said it has been frustrating but manageable to pay employees and track his purchases and expenses using cash. Until recently, taxes were problematic, since the payment of federal and most state payroll taxes must be made via electronic funds transfer. So he installed an ATM in his dispensary, which he stocks with his own money — now, when customers withdraw cash before purchasing goods, he receives an electronic record.
His biggest concern, he said, is warding off thieves.
“I’d sleep a lot better at night if no one knew we were cash-based,” he said.
Lance Smith, owner of Boulder Kind Care, one of the first licensed dispensaries in the state, says he’s one of only a few lucky dispensary owners with whom banks still work covertly. But after going through 11 banks in the two years he’s been in business, Smith said he wouldn’t be surprised if his bank cut him off tomorrow.
“Dispensaries are losing legitimacy,” he said. “We want transparency — the ability to write checks, make deposits and track our paper trails — just as any other business does.”
Supporters are optimistic that the bill will pass. However, a proposal last year by Massey that the state create and regulate investment trusts for the medical marijuana industry was rejected after objections by U.S. Attorney John Walsh, who wrote to Colorado Attorney General John Suthers that he would “consider civil and criminal legal remedies regarding those who invest in the production of marijuana … even if the investment is made in a state-licensed fund of the kind proposed.”
Walsh, who did not respond to requests for comment, also sent an ultimatum to 23 state dispensaries located within 1,000 feet of schools earlier this month, notifying the landlords that they were in violation of federal and state law, and had 45 days to cease operations before facing civil and criminal penalties.
Mike Saccone, a spokesman for Suthers, said it was “premature” to comment on the financial cooperative bill, but that new laws can’t ignore the fact that “even if medical marijuana is legal in Colorado, it’s still illegal at the federal level.”
Still, the bill is the “No. 1 objective” this session for the Medical Marijuana Industry Group, said Michael Elliott, the director of the influential lobbying organization.
“Though this problem ultimately needs to be addressed at the federal level,” he wrote in an e-mail, “the state cannot wait for that to happen.”
Katie.Baker@thedaily.com
Under federal pressure, banks have stopped lending openly to Colorado’s medical marijuana shops, so state politicians introduced a bill in the state Senate on Thursday that would allow for a cooperative banking system just for the pot dispensaries.
“The state has taken great strides to legitimatize and regulate the medical marijuana industry,” said Sen. Pat Steadman, a Democrat, who is co-sponsoring the bill with Republican Rep. Tom Massey. “But our biggest challenge is finding banks that will serve them. We need a statewide solution to work around problems that find their origin in federal law.”
Senate Bill 75 would enable independent parties to create “exclusive financial cooperatives” subject to the same regulations as credit unions, except that they would be insured by “non-federally backed” insurance policies.
“I’ve promised never to use the term ‘credit union,’ ” Steadman told The Daily.
Although Colorado laws allow marijuana use for medical reasons, the state's banks stopped working publicly with dispensaries after the Justice Department threatened to crack down on even state-licensed medical marijuana shops last summer. Robert Friechtel, director of the Medical Marijuana Business Exchange, speculated that half of Colorado’s 700 dispensaries lost their bank accounts last September, when Colorado Springs State Bank became the last to shut out the industry.
“Forcing dispensaries to go cash-only is crazy,” Friechtel said. “How can owners safely and successfully run their businesses without any place to deposit money?”
Dispensaries have been forced to get creative to stay afloat.
One Colorado Springs shop owner, who asked to remain anonymous, said it has been frustrating but manageable to pay employees and track his purchases and expenses using cash. Until recently, taxes were problematic, since the payment of federal and most state payroll taxes must be made via electronic funds transfer. So he installed an ATM in his dispensary, which he stocks with his own money — now, when customers withdraw cash before purchasing goods, he receives an electronic record.
His biggest concern, he said, is warding off thieves.
“I’d sleep a lot better at night if no one knew we were cash-based,” he said.
Lance Smith, owner of Boulder Kind Care, one of the first licensed dispensaries in the state, says he’s one of only a few lucky dispensary owners with whom banks still work covertly. But after going through 11 banks in the two years he’s been in business, Smith said he wouldn’t be surprised if his bank cut him off tomorrow.
“Dispensaries are losing legitimacy,” he said. “We want transparency — the ability to write checks, make deposits and track our paper trails — just as any other business does.”
Supporters are optimistic that the bill will pass. However, a proposal last year by Massey that the state create and regulate investment trusts for the medical marijuana industry was rejected after objections by U.S. Attorney John Walsh, who wrote to Colorado Attorney General John Suthers that he would “consider civil and criminal legal remedies regarding those who invest in the production of marijuana … even if the investment is made in a state-licensed fund of the kind proposed.”
Walsh, who did not respond to requests for comment, also sent an ultimatum to 23 state dispensaries located within 1,000 feet of schools earlier this month, notifying the landlords that they were in violation of federal and state law, and had 45 days to cease operations before facing civil and criminal penalties.
Mike Saccone, a spokesman for Suthers, said it was “premature” to comment on the financial cooperative bill, but that new laws can’t ignore the fact that “even if medical marijuana is legal in Colorado, it’s still illegal at the federal level.”
Still, the bill is the “No. 1 objective” this session for the Medical Marijuana Industry Group, said Michael Elliott, the director of the influential lobbying organization.
“Though this problem ultimately needs to be addressed at the federal level,” he wrote in an e-mail, “the state cannot wait for that to happen.”
Katie.Baker@thedaily.com
PHOTO: Boulder Kind Care
Veteran pot dispensary Boulder Kind Care has gone through 11 banks in two years.
PHOTO: Rick Wilking/Reuters
Name your strain at Alpine Herbal Wellness in Denver, a pot dispensary that’s struggled with bank service.
