Colorado’s Legal Weed Troubles
If the federal government allows Colorado pot sellers to store their money in a bank, is the federal government aiding drug dealers? According to some financial analysts, the answer is a resounding yes.
So opens the story of Mark Mason. Mason, as the New York Times reports, is an attorney turned marijuana entrepreneur, though not in the way you might think. Mason is interested in the banking side of Colorado’s booming marijuana economy. So much so that he recently formed the Fourth Corner Credit Union.
I’m getting a bit ahead of myself here. To accurately explain Mark Mason’s quest to legitimize marijuana in the financial industry, we first need to look at how the Colorado pot business works.
Recreational Weed & Lots of Cash
Marijuana has been legal in Colorado, in one form or another, since the early 2000’s. It was legalized for medical use in 2001 and for recreation use in late 2012. State laws notwithstanding, marijuana is still a Schedule I narcotic nationally. This has led Colorado banks to limit their involvement with all pot businesses, medical or recreational.
And who can blame the banks? In the cutthroat world of professional finance, being raided by the DEA is about as bad as it gets. Banks simply don’t want to take the risk of being prosecuted for aiding drug dealers.
So, without support from the banking industry, most Colorado marijuana businesses are left with cash and lots of it. This has led to increase in armored cars and armed guards around Denver and other major cities. It’s safe to say that the lack of institutional legitimacy facing the legal marijuana business has turned it into something resembling the very illegal cocaine or heroin businesses.
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A Business Opportunity
And then Mark Mason heard about the troubles facing Colorado’s over 1,000 pot businesses.
A lawyer from South Carolina, Mason is an unlikely hero in the sage of America and marijuana. But when he heard about the struggles of ordinary citizens attempting to build successful businesses, he sprang into action.
Mason was “…captivated by the ‘opportunity to work on one of the great political, social and constitutional issues of that day,’ one that made his day job ‘pale by comparison’” (New York Times).
So, he moved to Colorado and, along with other lawyers, a surgeon, and a politician, formed the Fourth Corner Credit Union. They soon applied to the Federal Reserve Bank for something called a Master Account. This allows them to deposit money and transfer funds electronically with other banks.
They applied for their Master Account in late 2014 and, as of this writing, have yet to hear back from the Federal Reserve. It’s worth noting that approval usually takes less than a week. In early January, the business partners did receive a note that their application was “under review.”
It makes sense that the Federal Reserve is taking their time with this decision. After all, it has the potential to affect the future of marijuana on a national level. If the Federal Reserve grants Fourth Corner a Master Account, they’re essentially opening the floodgates of marijuana legalization on a nationwide level.
Never before has a bank account had so much potential to change federal law.
A Slimmer of Hope
The news isn’t all gloom and doom for Colorado’s marijuana businesses. In early 2014, Valentine’s Day to be exact, the Justice Department sent out a set of guidelines for prosecuting marijuana businesses. These guidelines, which have come to be called the Cole Memo, aren’t law, but they do set a weighty precedent.
The Cole Memo suggested that prosecutors disregard the majority of recreational marijuana businesses. Instead, they should focus only on “significant cases.” These include cases where pot is sold to minors, sold in states that haven’t legalized it (for medical or recreational purposes), and firearm violence is involved.
What does the Cole Memo mean for the future of Colorado’s pot sellers? On that matter, I’m not quite sure. It’s a step in the right direction certainly, though if the Federal Reserve denies Forth Corner’s application, how much of a step is it?
It looks like when it comes to legal marijuana and the financial industry, we’re simply going to have to wait and see.