Grams of marijuana are weighed at a Denver metro area recreation pot store on Jan. 1, 2014. (Craig F. Walker, Denver Post file)

Cannabis credit union? Colo. bill would create banking option for pot businesses

Colorado legislators proposed the creation of local financial-service cooperatives — the business equivalent of a credit union — for legal marijuana shops as a way to force federal authorities to decide definitively whether the pot industry can access critical banking services.

In a novel twist on the credit-union concept, which limits membership to individuals, Rep. Jonathan Singer, D-Boulder, offered House Bill 1398, which would create “cannabis credit co-ops” for licensed pot businesses and those who do business with them.

(UPDATE: House Bill 1398 got off to a strong start Thursday in the House Business Committee, only, to get gutted late that evening in the House Finance Committee before House Appropriations restored the original version Friday morning and sent the measure to a vote on the House floor. Details here)

“This sets up a structure of a new type of financial structure to the gap we’re seeing between banking and the marijuana industry,” Singer said during testimony Thursday afternoon. “It’s the only solution we see.”

Though the bill allows the creation of co-ops similar to a credit union, their access to the nation’s financial banking system would require approval from the Federal Reserve Bank.

Without that approval, the co-op system could not operate.

“This is a message to the federal government to say we are ready to go,” Singer said. “Start with a template, then ask for federal approval, sending a very clear message.”

Despite the vote, the bill initially met with mixed opinions.

“Anything we do at the state level is not going to get around the issue of money laundering without the cooperation of the federal government and the Federal Reserve,” Rep. Chris Holbert, R-Parker, said. “Aren’t we building a system that puts these co-ops in the business of money laundering?”

Related: More coverage of marijuana banking

Bankers say Colorado’s co-op solution is unlikely to work — mostly because the bill requires permission from the Federal Reserve, which hasn’t said whether it would, or could, OK access — leaving Congress to find a way to break the stand-off.

“We have no problem with them trying it,” said Don Childears, CEO of the Colorado Bankers Association, which is neutral on the bill. “But when it won’t work, the message to Congress is that we’re all done at the state level and they have to focus and deal with it.”

The idea for forming co-ops came from credit unions unsuccessfully wanting to form for the industry, according to Andrew Freedman, Colorado’s director of marijuana coordination.

The hope, Freedman said, is to bring the model to the Federal Reserve and demand an answer to whether marijuana businesses can finally enter the banking system.

“We will be in a strong position to lobby Congress if we’ve tried every avenue to get into the system,” Freedman said, adding it would take about a year for the co-op structure to form.

Childears said he doubts the system would gain Federal Reserve approval, mostly because marijuana remains illegal under federal law.

“If I’m wrong, I’ll be the first to admit it and wish them well,” he said of the proposal. “But I don’t think I’m wrong.”

Colorado Attorney General John Suthers agreed to remain neutral on the bill only if the provision requiring Federal Reserve permission remained.

A spokesman at the Federal Reserve Bank refused to comment about the bill or the concept of a co-op system.

Co-sponsor Sen. Pat Steadman, D-Denver, agreed the bill doesn’t actually solve the problem with marijuana and banking.

“I have long said the issue cannot be solved at the (state) Capitol, and I don’t hold the current Congress in high esteem to get anything done,” he said. “But this bill would lay it squarely at their feet and force the conversation.”

The co-ops would be regulated by the state commissioner of financial services, Chris Myklebust.

“These folks are used to risk and this is one of the greatest social experiments that I’ve witnessed,” Myklebust said. “The risk exists but puts the onus on the entrepreneurial community willing to take that risk.”

Unable to easily get banking services — marijuana remains illegal under federal laws that also control the nation’s banking system — pot shops, medicinal and recreational, have struggled with how best to handle the millions of dollars in cash that flows through their registers.

Related: Congress says “meh” to marijuana banking bill

Though federal authorities — bank regulators and prosecutors — earlier this year gave guidance for banks wanting to handle marijuana business deposits, most in the industry said it was little more than limited assurance that they could do so without legal reprisal.

Efforts at Congressional reform have stalled, with bills designed to give specific permission for banks to accommodate marijuana businesses still awaiting committee hearings.

The state bill does not require deposit insurance, as regular banks and credit unions must have. That could be a problem, Childears said.

“You need (Federal Deposit Insurance Corporation) or National Credit Union (Administration) insurance to be a (Federal Reserve) member,” Childears said. “It’s specifically articulated in the Federal Reserve Act. It’s black and white.”

The insurance carries restrictions, including prohibitions on knowingly doing business with illegal enterprises, he explained.

“This is simply not a simple solution,” Childears said.

David Migoya: 303-954-1506, or

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