The financial and marijuana industriesappear to still be digesting comments made last week by U.S. AttorneyGeneral Eric Holder, who said that legal marijuana businessesshould have access to the banking system.
Speaking during anevent at the University of Virginia, Holder said the Departmentof Justice would soon unveil proposed regulations regardingsuch transactions.
While using marijuana remains a crime underfederal law, 20states and the District of Columbia have legalized the medicaluse of cannabis. And earlier this month, Colorado and Washingtonstate made the recreational use of marijuana legal for adults.
Holder said the move is “an attemptto deal with a reality that exists in these states,” and to reducethe cash-only system many marijuana businesses are forced to use.
“There’s a public safety component to this,” he added. “Hugeamounts of cash, substantial amounts of cash just kind of lyingaround with no place for it to be appropriately deposited, issomething that would worry me, just from a law enforcementperspective.”
Holder’s remarks are getting mixed reviews from cannabisbusinesses in Denver.
“The news is wonderful,” saidElliot Klug, CEO and partner of Pink House, a medical marijuanacompany with seven retail stores and five production facilities inColorado. “The sooner it is on paper, the better. It will be a boonand a relief when full banking is authorized. We are spending so muchtime handling cash it has become almost ridiculous.”
Klug believes the change would notonly reduce the financial uncertainty his industry facesbut would further increase investment opportunities in cannabis.
But Kayvan Khalatbari,co-owner of the Denver Relief medical marijuana facility,remains skeptical.
“Is it asign that this industry is well on its way to becoming legitimate inthe eyes of the Feds? Yes,” he said, “but talk is cheap, and both [Holder and President Barack Obama] have a history of saying one thing and doinganother, so I won’t hold my breath.”
There’salso the question of what the major credit card companies would do if banks start to allow marijuana companies to open accounts andhave normal transactions.
“Weprohibit the use of the card for marijuana transactions and adhere tofederal law in such matters,” said Sanette Chao, director of corporate affairs and communications at American Express (AXP).
Although Amex doesn’t have a separate policy for businesses that provideancillary goods and services to marijuana sellers, Chao notes thecompany does ban unlawful transactions and reserves the right “toterminate merchant contracts that are harmful to our brand or havehigh levels of card member credit losses and customer servicedisputes.”
Experts who have watched the cannabisindustry evolve believe the credit card companies will follow thebanks’ lead, should the federal government chose to change the lawor, at least, look the other way.
“Ifall of this is cleared on a federal basis, then it will just beviewed as any other transaction that goes through their process,”said Mac Clouse, aprofessor of finance at the University of Denver’s Daniels College ofBusiness.
Clousealso believes this has become a fairness issue, with stateswhere residents voted to legalize marijuana for medical andrecreational wanting their local laws to be upheld.
“Ifyou vote to make this product legal, then [the marijuana businesses]shouldn’t be at a disadvantage in dealing with general businesspractices compared to all other businesses,” he added. “You’reeither going to legalize it and let them be a viable business, ornot. Don’t try to put them somewhere in between, where it just makesthem have more risks than any other small business.“