The Federal Reserve allows banks to open their doors all the time. But pot is preventing it from giving its seal of approval to a tiny Colorado credit union.
The Fourth Corner Credit Union had hoped to help Colorado's growing legal marijuana industry solve a cash management problem stemming from its lack of access to banking services. But the Fed maintains it can't allow the credit union to operate because its focus would be serving a clientele whose business is still illegal at the federal level.
Allowing such a thing would be like allowing trade with North Korea, the Kansas City Fed said in issuing its latest blow to the Colorado-based Fourth Corner Credit Union.
The Kansas City Fed is asking a Colorado District Court to dismiss a lawsuit filed against it by the credit union after officials denied its applications for regulatory approval and insurance earlier this year.
“The court would not entertain other such attempts — such as if Colorado enacted a scheme to allow trade in endangered species or trade with North Korea in derogation of federal laws, and then chartered a credit union to handle the finances for companies conducting such illegal trade,” it said in its latest court filing.
This isn't just the Fed being difficult, according to Chris Pippett, a partner at the Pennsylvania law firm Fox Rothschild LLP. "The Fed's hands are tied," he said. "The federal law governs their activies, and the Fed, just like any other bank, can't handle the proceeds of illegal activity."
The National Cannabis Industry Association is not pleased with the decision. The credit union can't open without the Fed's blessing, which would allow it access to the U.S. banking system and the ability to conduct electronic transactions.
"When the Fed stonewalls a solution crafted with the cooperation of state officials and designed to meet the Treasury Department’s own guidelines, it’s clear this conflict has gone too far,” said Taylor West, deputy director of the Denver-based National Cannabis Industry Association.
The Fed’s latest move is a contradiction on the part of the U.S. government, which last year issued guidance for banks looking to do business with legal cannabis companies. It also comes at a time when governments around the world are softening their stances on cannabis.
In Canada, Prime Minister-elect Justin Trudeau, has said he would make cannabis legalization a priority. Mexico’s Supreme Court has scheduled a hearing to discuss legalizing cannabis for next week. Australia also is planning on legalizing medical cannabis, and U.K. lawmakers recently held their own debate on the issue. A petition to legalize cannabis in the U.K. has already garnered more than 226,000 signatures.
Meanwhile in the U.S., the latest Gallup poll data shows 58% of adults support marijuana legalization, a figure that has been steadily increasing as more states have legalized or are considering legalizing cannabis.
So far, four states — Alaska, Colorado, Oregon and Washington — and the District of Columbia have legalized recreational marijuana while 23 states have legalized medical marijuana. Colorado, Oregon and Washington have already begun sales of legal marijuana, and Colorado alone sold more than $700 million worth of marijuana last year.
Marijuana is on track to become $1 billion a year industry in Colorado, a projection the National Cannabis Industry Association plans to put on display during next week’s Republican presidential debate in Boulder.