| The head of the Massachusetts Cannabis Control Commission last week called for the establishment of a state-run financial institution to bank marijuana deposits – an eminently sensible and practical suggestion.
A clash between the federal and state laws has arisen as the Bay State gears up for legalized recreational marijuana in July.
Banking marijuana deposits is murky territory, since while recreational pot is soon to be legal in Massachusetts, it remains illegal per the federal government. Furthermore, handling any deposits related to marijuana sales is considered money laundering.
Several Colorado banks have solved this issue with the unwieldy workaround of keeping deposits related to marijuana separate from those of the general population (and refusing to talk about it). While that may be a viable solution in the Bay State, it requires more oversight from the banks – something with which they are intimately familiar, but would prefer not to further engage.
Century Bank is the only state-chartered bank currently banking medical marijuana deposits, though rumors of more exist.
It is difficult to overstate the opportunities in every branch and bud of this growing industry. Startup entrepreneurs, growers, landlords, private security, bankers, the commonwealth – all stand to hugely benefit from the legalization of recreational marijuana (not to mention the end users).
But it’s a dangerous business. Without a bank willing to accept deposits, there can be no checking account; everything – rent, shipments, the product itself – must be paid for in cash.
A landlord who accepts a cash payment for the rent of a marijuana facility and deposits it into his or her own corporate account would also be guilty of money laundering. That’s a major deterrent to renting the space to a pot shop.
Thousands of dollars – or tens of thousands – sitting in a safe is an invitation for robbery. It hardly needs saying that neither proprietors nor customers are much interested in getting caught up in such an occasion.
All told it is much safer, and much more efficient, for these businesses (indeed, all businesses) to utilize the services of a financial institution. But the state’s credit unions and banks cannot be blamed for shying away from the prospect of federal asset seizure and prosecution. And the federal government does not seem likely to clarify its position any time soon.
Enter the state pot bank.
It’s probably a shot across the bow of the Trump administration to even consider such a thing, but the proceeds from the nascent industry will more than cover the costs of defending the newborn bank.
Details are sparse, but if the bank can operate in all the ways a bank should – not only taking in deposits, but also able to then lend those deposits to the community it serves – it would be a gamechanger for the marijuana industry.
The Baker administration has no plans to pursue the commissioner’s proposal. It should revisit that position. By establishing a state-run pot bank, Massachusetts has the opportunity to be a true pioneer and leader. Instead, we are poised to fall into the same tangle as Colorado – a tangle that will take decades to unravel.
