Backing down from a five-hour fight over whether industrial hemp farmers should be able to access a new credit union-like arrangement for marijuana businesses, the state House narrowly passed a pot banking bill that would create the first cooperative of its kind.
Acquiescing to Senate insistence that hemp farmers be allowed to join the cooperatives, representatives voted 33-31 for House Bill 1398, sending it to Gov. John Hickenlooper’s desk for approval and, ultimately, a showdown with federal banking regulators.
The cooperative setup requires approval by the U.S. Federal Reserve, which regulates the nation’s banking system.
The vote was the ultimate compromise for legislators who wanted to keep the cooperatives limited to marijuana businesses.
But industrial hemp farmers had voiced problems about accessing banking services, specifically with co-mingling loans on crops such as wheat and corn with hemp.
“Two farmers with lines of credit were threatened, one told outright that if he grew hemp, the bank would terminate his line of credit,” said Samantha Walsh of the Rocky Mountain Hemp Association.
Banking lobbies that agreed to remain neutral on the House Bill 1398 have flipped to opposing it because hemp farmers were included.
It is unclear whether Hickenlooper will sign the bill with the politically powerful bankers lobbies opposed to it, or with the hemp provision included. His office nevertheless expressed initial optimism.
“We are very happy this legislation passed,” said Andrew Freedman, the governor’s director of marijuana coordination. “This gives us an avenue to go to the Federal Reserve, and get cash off the street. That was by far our No. 1 priority.”
Part of the concern with not being able to access regular banking is that marijuana businesses are then forced to be cash-only, making them targets for crime. Many business owners, however, have learned how to access bank services, often by disguising themselves behind non-descriptive corporate names.
Senators added the provision for hemp farmers because the plant is treated the same as marijuana under federal law. Testimony offered Wednesday to smooth over differences in House and Senate versions painted a grim picture of hemp farmers threatened by bankers should they plant the crop.
With senators insisting it be included and representatives insisting it be removed — with bankers declaring they’ll heartily oppose it as long as hemp farmers are included — the historic effort at solving the marijuana industry’s problem accessing banking services appeared doomed as the legislative session ticked toward its end.
“Ultimately the biggest issue was whether industrial hemp’s access to bank services was really a problem or not,” bill co-sponsor Rep. Jonathan Singer, D-Boulder, said. Senators “are steadfast in their desire that they can operate in these cooperatives.”
Bankers were clear in their resolve to oppose the bill — even to the governor.
“Our concern with adding industrial hemp is it’s not what we understood the co-op was to be and broadening its powers in an untested scheme is dangerous ground,” Jenifer Waller, vice president of the Colorado Bankers Association.
Proponents say the bill is Colorado’s their last and best effort at forcing federal authorities to take up the long-standing problem the marijuana industry faces: as long as marijuana is illegal under federal law, banks are hesitant to openly offer their services.
That means businesses involved in the multi-million dollar fledgling industry — retail recreational marijuana sales began Jan. 1 in Colorado — are forced to remain cash-only enterprises, with high crime risks.
The entire experiment — there are no commercial credit unions in America — hinges on approval by the Federal Reserve Bank, which oversees the nation’s payment system. Credit unions, by law, are restricted to individual membership.
Because marijuana remains illegal under federal law, businesses cannot technically gain access, though many have quietly, some suffering through several banking relationships that close once their business becomes known.
Bankers say it’s unlikely the cooperative will be approved, mostly because they will not be required to have deposit insurance, a necessity to become a member of the Federal Reserve system.