By Henry Meier, Esq., Credit Union Times
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A little more than a decade ago, marijuana banking was one of my favorite subjects to blog about. The Justice Department released the Cole memo in 2013 detailing the circumstances under which it would not prosecute entities involved in the marijuana business, states were moving in the direction of legalizing marijuana and it was only a matter of time, of course, before Congress got around to legalizing the possession and sale of marijuana on the federal level. The continued criminalization of the drug was nothing more than a vestige of a bygone era categorized by “Reefer Madness.”
I was among those who argued that these were good times for credit unions to be among the first institutions to offer banking services to Marijuana Related Businesses. In fact, in states like New York, they were actively being encouraged to do so.
And why not? True, marijuana banking required big investments in staff and technology to comply with heightened compliance requirements, but the expenses were more than outweighed by the profits to be made by opening accounts for marijuana-related businesses.
What a difference a decade can make. These assumptions look as outdated as a Cheech & Chong movie.
On a policy level, there is an increasing recognition that the legalization of cannabis does not come without its flaws. On the political front, momentum for legalization has stalled on the federal level. And perhaps, most importantly, as recent cases demonstrate, the legal complications stemming from state legalization of a product that remains unequivocally illegal under federal law continue to vex depository institutions intrigued by the possibility of providing banking services to MRBs.
In 2014, the New York Times editorial board reflected conventional wisdom when it came out strongly in favor of legalization of marijuana for both recreational and medical purposes. As the paper explained in a Mea Culpa of sorts written earlier this year:
“At the time, supporters of legalization predicted that it would bring few downsides. In our editorials, we described marijuana addiction and dependence as ‘relatively minor problems.’ Many advocates went further and claimed that marijuana was a harmless drug that might even bring net health benefits. They also said that legalization might not lead to greater use. It is now clear that many of these predictions were wrong.”
According to the Times, an estimated 18 million people use marijuana at least five times per week. Annually, 2.8 million Americans experience “cannabinoid hyperemesis syndrome,” or persistent nausea and vomiting. Today’s marijuana is much more powerful than the stuff puffed, but not inhaled, by President Clinton. Like alcohol, it can result in serious health problems. Anecdotally, as someone who lives in a state where recreational use is legal, the constant presence of that unique aroma can be downright annoying. After all, we allow people to drink in their houses, not in the middle of a public street. Given these downsides, is this really the type of activity that credit unions want to be associated with?
Then there is politics. In 2019 the House of Representatives passed the SAFE Act, which legalized banking services for cannabis businesses with bipartisan support. Furthermore, as late as 2020, it even passed the more radical MORE Act, which would effectively legalize marijuana by removing it as a Schedule I drug under the Controlled Substances Act.