Some local banks and credit unions have been quietly taking on marijuana businesses as customers. Pictured: Sally Vander Veer of Colorado marijuana retailer Medicine Man, left, hands bags of cash to a security company that will transport $100,000 from the business to state offices for a tax payment. (Hyoung Chang, Denver Post file)

California hopes to take lead on fixing marijuana banking troubles in 2017

California hopes to take the lead in giving the industry access to marijuana banking services in 2017, with a new working group focused on finding a solution to conflicts between state and federal laws that force marijuana businesses to operate largely in cash.

The Golden State has a year to come up with a plan. That’s when California’s first recreational marijuana shops are expected to open under voter-approved Proposition 64, which legalized marijuana for adults 21 and over.

“We need quick action and practical solutions,” said State Treasurer John Chiang, who formed the Cannabis Banking Working Group, said on a call with reporters in December. “California is willing to assume a leadership role nationally to effectively achieve this goal.”

Federal law still classifies cannabis as a Schedule I narcotic on par with heroin. That means major banks and credit card companies won’t do business with growers and dispensaries out of fear they’ll be penalized for money laundering.

That changed little even after U.S. Deputy Attorney General James Cole in 2013 issued his now-famous “Cole memo,” which gave banks guidance on how to service marijuana businesses without breaking any federal laws.

Some local banks and credit unions have been quietly taking on marijuana businesses as customers. A 2015 report from American Banker showed 266 of the nation’s nearly 6,200 financial institutions had accounts with marijuana-related businesses.

But once recreational pot shops can open after Jan. 1, California’s cannabis industry is expected to start raking in $7 billion in profits and paying $1 billion in state taxes each year.

“A lot of businesses will be hauling around a lot of cash with no place to deposit their money, putting them at risk of robbery,” Chiang said.

That also makes the industry ripe for money laundering, he noted.

Chiang brushed aside the idea of creating a state bank specifically to service cannabis customers. It’s an approach proposed by the Board of Equalization to combat the industry’s poor record of paying state taxes, and one that’s been tried and shut down by federal regulators in other legalized states.

The state of Colorado sought to create its own cannabis credit union in November 2014. But the Federal Reserve rejected the state’s applications to create a master account that would have allowed banks to do business with the credit union. And a U.S. District Court judge dismissed Colorado’s challenge to that decision, stating he was compelled to do so because marijuana remains illegal under federal law.

Efforts to remove marijuana from the Schedule I drug list have also repeatedly failed, most recently under the Obama administration. So have efforts to pass legislation that would remove criminal penalties for banks that service businesses that are operating in accordance with state law.

Those avenues seem even less promising now that Republicans, who have traditionally been less supportive of marijuana legalization, control both the executive and legislative branches. And President-elect Donald Trump’s choice of Alabama Sen. Jeff Sessions for attorney general hasn’t boosted optimism for a federal solution, given the Republican’s staunch opposition to marijuana in the past.

Chiang reached out to both Trump and California’s congressional delegation asking for clarification and support in finding banking solutions for the industry. But no federal representatives attended the first meeting of Chiang’s working group, which was held Dec. 19 in Sacramento.

The 16-member working group, along with about 100 attendees, including cannabis industry and banking stakeholders, gathered in the state Capitol not so much to discuss solutions, but to lay out the challenges ahead.

“Defining the problem is our first objective,” Chiang said. “As we continue to hold meetings around the state and compile information, I think we will continue to gain ever more clarity on precisely what should be done and how.”

The working group is set to hold four more meetings throughout the state to discuss banking issues.

Given that 45 states now permit some form of legal marijuana use, Chiang and other members of his banking group said they’re optimistic they’ll be able to make progress over the coming year in easing the conflict between state and federal law.

“The cannabis industry is the largest shadow economy in California,” group member and Board of Equalization Chairwoman Fiona Ma said in a statement. “Allowing them banking access would facilitate compliance and bring millions of dollars into our economy.”


Staff writer Will Houston contributed to this report.

Contact the writer: 714-796-7963 or or follow on Twitter @JournoBrooke

This story was first published on