Laura Bliss is CityLab’s west coast bureau chief. She also authors MapLab, a biweekly newsletter about maps (subscribe here). Her work has appeared in the New York Times, The Atlantic, Los Angeles magazine, and beyond.
Thanks to an overlooked law, Colorado's legal pot enterprises will finally get the legitimate banking services they need. But discord with the feds still casts a shadow over the industry.
Since Colorado opened the floodgates to recreational pot last January, revenues have soared. Estimated sales in August alone totaled $34.1 million, after months of profits in the tens of millions.
Yet the marijuana industry has struggled with what to do with all that green. With pot still illegal on the federal level, many banks and credit unions have hesitated to do business with vendors, despite guidance efforts from the U.S. Departments of the Treasury and Justice. Sellers have continued to operate largely through money orders and ATM withdrawals.
But the banking conundrum may be nearing its end. Last week, Colorado's Division of Financial Services chartered the world's first credit union geared specifically for the weed industry. The Fourth Corner Credit Union could open as soon as January 1, the one-year anniversary of recreational legalization.
Why hadn't this already happened? It's because of a hitherto overlooked piece of Colorado law, which allows state-chartered credit union to operate immediately after applying for required federal insurance from the National Credit Union Administration. Normally, the credit union would have to wait until after obtaining that deposit. Fourth Corner will be able to have its doors open while it waits an estimated two years for NCUA to process.
The Denver Post reports that Fourth Corner's organizers discovered that legal gem, which state financial services commissioner Chris Myklebust thoroughly vetted before approving the union's charter. "We do like to see all credit unions have federal deposit insurance [before they open]," he says, "but with the need we have here in Colorado to get these businesses' deposits into federal reserve system, it was in everyone's best interest to get this thing going."
Of course, the NCUA could eventually reject Fourth Corner's application for federal insurance, and effectively shut it down. So the credit union will operate precariously, and with bated breath.
Still, says Myklebust, Fourth Corner's charter "moves the conversation" forward not only for Colorado law, but also for future federal legislation that could truly clarify and legitimize the pot industry. "A good place to start would be to create a legal safe harbor for banks, credit unions, and even regulators," he says, "so that if they're serving these legal businesses, they don't have to be concerned about federal legal action against them."
Then, he says, Congress could "tackle the bigger issue" at hand: Amending the Controlled Substances Act, in order to solve the discord between state and federal interpretations of weed's legality. But until that day, along with Washington, Oregon (both have credit unions tiptoeing into the industry), and Alaska, Colorado's high will be just a tad harsh.